tag:blogger.com,1999:blog-57644621555823532292024-02-09T01:12:41.625+08:00Primus Information CenterPrimus Information Center, Inc. Primusinfo Primusinformation Law Bar Review Philippines LawyerAnonymoushttp://www.blogger.com/profile/03321018346771806482noreply@blogger.comBlogger10125tag:blogger.com,1999:blog-5764462155582353229.post-20814470299993247632012-04-19T11:09:00.002+08:002012-04-19T11:40:55.297+08:00Your Lecturer: Atty. Abelardo DomondonYour lecturer for all the modules is an <span style="color: red;">examiner</span> in the <span style="color: red;">2011 Bar Exams</span>.Anonymoushttp://www.blogger.com/profile/03321018346771806482noreply@blogger.com1tag:blogger.com,1999:blog-5764462155582353229.post-80634759585592584762012-04-19T10:57:00.002+08:002012-04-19T11:45:51.758+08:00PRiMUS 2012 BAR REVIEW SCHEDULELegal and Judicial Ethics August 3 & 4, 2012<br />
Remedial Law August 7 & 8, 2012<br />
Criminal Law August 10 & 11, 2012<br />
Mercantile Law August 14 & 15, 2012<br />
Taxation Law August 17 & 18, 2012<br />
Civil Law and Land Reg. August 21 & 22, 2012<br />
Labor Law August 24 & 25, 2012<br />
Political and Intl Law August 28 & 29, 2012<br />
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For more information and for enrollment, please contact Mrs. Domondon @ 09173376479, Atty. Celia Valdez @ 09177908406, or Leon Valdez @ 09177936169 and leonvaldez@gmail.comAnonymoushttp://www.blogger.com/profile/03321018346771806482noreply@blogger.com3tag:blogger.com,1999:blog-5764462155582353229.post-70681703640041822732008-09-10T22:39:00.000+08:002008-09-10T22:59:25.539+08:00PRIMUS 2008 ONE-LINERS: TAXATION PART 2<meta equiv="Content-Type" content="text/html; charset=utf-8"><meta name="ProgId" content="Word.Document"><meta name="Generator" content="Microsoft Word 10"><meta name="Originator" content="Microsoft Word 10"><link rel="File-List" href="file:///C:%5CUsers%5CVenny%5CAppData%5CLocal%5CTemp%5Cmsohtml1%5C01%5Cclip_filelist.xml"><!--[if gte mso 9]><xml> <w:worddocument> <w:view>Normal</w:View> <w:zoom>0</w:Zoom> <w:compatibility> <w:breakwrappedtables/> <w:snaptogridincell/> <w:applybreakingrules/> <w:wraptextwithpunct/> <w:useasianbreakrules/> <w:usefelayout/> </w:Compatibility> <w:browserlevel>MicrosoftInternetExplorer4</w:BrowserLevel> </w:WordDocument> </xml><![endif]--><style> <!-- /* Font Definitions */ @font-face {font-family:SimSun; panose-1:2 1 6 0 3 1 1 1 1 1; mso-font-alt:宋体; mso-font-charset:134; mso-generic-font-family:auto; mso-font-pitch:variable; mso-font-signature:3 680460288 22 0 262145 0;} @font-face {font-family:"Arial Black"; panose-1:2 11 10 4 2 1 2 2 2 4; mso-font-charset:0; mso-generic-font-family:swiss; mso-font-pitch:variable; mso-font-signature:647 0 0 0 159 0;} @font-face {font-family:"\@SimSun"; panose-1:2 1 6 0 3 1 1 1 1 1; mso-font-charset:134; mso-generic-font-family:auto; mso-font-pitch:variable; mso-font-signature:3 680460288 22 0 262145 0;} /* Style Definitions */ p.MsoNormal, li.MsoNormal, div.MsoNormal {mso-style-parent:""; margin:0in; margin-bottom:.0001pt; mso-pagination:widow-orphan; font-size:10.0pt; font-family:"Times New Roman"; mso-fareast-font-family:"Times New Roman"; mso-ansi-language:EN-US; mso-fareast-language:EN-US;} p.MsoTitle, li.MsoTitle, div.MsoTitle {mso-style-link:" Char"; margin:0in; margin-bottom:.0001pt; text-align:center; mso-pagination:widow-orphan; font-size:22.0pt; mso-bidi-font-size:10.0pt; font-family:Arial; mso-fareast-font-family:"Times New Roman"; mso-bidi-font-family:"Times New Roman"; mso-ansi-language:EN-US; mso-fareast-language:EN-US; font-weight:bold; mso-bidi-font-weight:normal;} span.Char {mso-style-name:" Char"; mso-style-link:Title; mso-ansi-font-size:22.0pt; font-family:Arial; mso-ascii-font-family:Arial; mso-hansi-font-family:Arial; mso-ansi-language:EN-US; mso-fareast-language:EN-US; mso-bidi-language:AR-SA; font-weight:bold; mso-bidi-font-weight:normal;} @page Section1 {size:8.5in 11.0in; margin:1.0in 1.25in 1.0in 1.25in; mso-header-margin:.5in; mso-footer-margin:.5in; mso-paper-source:0;} div.Section1 {page:Section1;} --> </style><!--[if gte mso 10]> <style> /* Style Definitions */ table.MsoNormalTable {mso-style-name:"Table Normal"; mso-tstyle-rowband-size:0; mso-tstyle-colband-size:0; mso-style-noshow:yes; mso-style-parent:""; mso-padding-alt:0in 5.4pt 0in 5.4pt; mso-para-margin:0in; mso-para-margin-bottom:.0001pt; mso-pagination:widow-orphan; font-size:10.0pt; font-family:"Times New Roman";} </style> <![endif]--> <p class="MsoTitle"><span style="font-size: 16pt;" lang="EN-US">“PRIMUS </span><span style="font-size: 16pt; font-weight: normal;" lang="EN-US">2008 </span><span style="font-size: 16pt;" lang="EN-US">ONE-LINERS”<o:p></o:p></span></p> <p class="MsoTitle" style="text-align: justify;"><span style="font-size: 18pt; font-weight: normal;" lang="EN-US"><o:p> </o:p></span></p> <p class="MsoNormal" style="text-align: center;" align="center"><b style=""><span style="font-size: 24pt; font-family: "Arial Black";" lang="EN-US"><span style=""> </span></span></b><b style=""><span style="font-size: 24pt; font-family: "Arial Black";" lang="EN-US">TAXATION</span></b><b style=""><span style="font-size: 24pt; font-family: "Arial Black";" lang="EN-US"><o:p></o:p></span></b></p> <p class="MsoNormal" style="text-align: center;" align="center"><span style="font-family: Arial;" lang="EN-US">VER. 2008.09.10<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: center;" align="center"><span style="font-family: Arial;" lang="EN-US">copyrighted 2008<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: center;" align="center"><b style=""><span style="font-family: Arial;" lang="EN-US"><o:p> </o:p></span></b></p> <p class="MsoNormal" style="text-align: center;" align="center"><span style="font-size: 12pt; font-family: Arial;" lang="EN-US">Prepared by the <b style="">PRIMUS</b> Board of Cons</span><span style="font-size: 11pt; font-family: Arial;" lang="EN-US">ultants<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: center;" align="center"><span style="font-size: 11pt; font-family: Arial;" lang="EN-US">Prof. Abelardo T. Domondon<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: center;" align="center"><span style="font-size: 11pt; font-family: Arial;" lang="EN-US">Principal Consultant<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: center;" align="center"><span style="font-family: Arial;" lang="EN-US"><o:p> </o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><b style=""><span style="font-size: 14pt; font-family: Arial;" lang="EN-US"><span style=""> </span></span></b><span style="font-size: 11pt; font-family: Arial;" lang="EN-US">These Notes in the form of one or two sentences and questions and answers were specially prepared by a<span style=""> </span>Board of Consultants specially commissioned by <b style="">PRIMUS</b> Information Center, Inc., for the use of candidates who are going to take the 2008 Bar Examination.<span style=""> </span>They are not as comprehensive as the other <b style="">PRIMUS </b>publications such as the <b style="">PRIMUS </b>Bar Star Notes, or the <b style="">PRIMUS </b>Cut and Paste.<span style=""> </span>They are intended to be read during the Pre-Week or before the start of the regular Bar review for any given Bar Examination year.<b style=""> </b><span style=""> </span><u><o:p></o:p></u></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-family: Arial;" lang="EN-US"><o:p> </o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 12pt; font-family: Arial;" lang="EN-US"><span style=""> </span></span><span style="font-size: 11pt; font-family: Arial;" lang="EN-US">These Notes attempt to second guess the areas where questions may probably be sourced for the 2008 Bar Examination in Taxation. They include enumerations and distinctions, as well digests of some landmark cases, although they go beyond two sentences. They may also serve as “memory joggers” to help the candidate recall concepts.<span style=""> </span>The reader is advised to concentrate on the “One-liners” that are in bold letters.<span style=""> </span>Those that are not in bold are mere elucidations of concepts.<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-family: Arial;" lang="EN-US"><o:p> </o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 11pt; font-family: Arial;" lang="EN-US"><span style=""> </span>The </span><span style="font-size: 11pt; font-family: Arial;" lang="EN-US">“<b style="">PRIMUS</b> 2008<b style=""> ONE-LINERS</b>” shall be revised regularly to consider latest law and jurisprudence to meet the requirements of future Bar Reviews such that the title shall change from year to year. For the 2009 Bar examination the title shall be “<b style="">PRIMUS</b> 2009<b style=""> ONE-LINERS”</b> which shall be released sometime in September, 2009. The reader is however advised to acquire and read the latest versions of the other<span style=""> </span></span><b style=""><span style="font-size: 11pt; font-family: Arial;" lang="EN-US">PRIMUS </span></b><span style="font-size: 11pt; font-family: Arial;" lang="EN-US">publications such as the <b style="">PRIMUS </b>Bar Star Notes, or the <b style="">PRIMUS </b>Cut and Paste which contain more detailed information leading to a more comprehensive Bar review.<span style=""> </span>Of course those who intend to take the 2009 Bar examination are encouraged to attend the <b style="">PRIMUS </b>2009 Wrap-up Reviews<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-family: Arial;" lang="EN-US"><span style=""> </span><o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 11pt; font-family: Arial;" lang="EN-US"><span style=""> </span>Although primarily for the use of Bar candidates who have attended the <b style="">PRIMUS </b>2008 Wrap-up Reviews, the “On-Liners” may be availed of by other students who are interested in the subject.<span style=""> </span>While available for the free use of all the contents of the </span><span style="font-size: 11pt; font-family: Arial;" lang="EN-US">“<b style="">PRIMUS</b> 2008<b style=""> ONE-LINERS</b>” </span><span style="font-size: 11pt; font-family: Arial;" lang="EN-US">are covered by copyright protection and should never be published (whether through printed media or through the internet) without written permission in writing from<span style=""> </span><b style="">PRIMUS </b>Information Center, Inc.<span style=""> </span>Downloading and printing into hard copies is allowed only for private use and should not be distributed on a commercial basis.</span></p><p class="MsoNormal" style="text-align: justify;">
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mso-level-tab-stop:1.0in; mso-level-number-position:left; text-indent:-.25in; mso-ansi-font-size:12.0pt; mso-ansi-font-weight:bold;} @list l28:level3 {mso-level-tab-stop:35.25pt; mso-level-number-position:left; margin-left:35.25pt; text-indent:-30.75pt; mso-ansi-font-size:12.0pt; mso-bidi-font-size:12.0pt; mso-ansi-font-weight:bold; mso-ansi-font-style:normal;} ol {margin-bottom:0in;} ul {margin-bottom:0in;} --> </style><!--[if gte mso 10]> <style> /* Style Definitions */ table.MsoNormalTable {mso-style-name:"Table Normal"; mso-tstyle-rowband-size:0; mso-tstyle-colband-size:0; mso-style-noshow:yes; mso-style-parent:""; mso-padding-alt:0in 5.4pt 0in 5.4pt; mso-para-margin:0in; mso-para-margin-bottom:.0001pt; mso-pagination:widow-orphan; font-size:10.0pt; font-family:"Times New Roman";} </style> <![endif]--> </p><p class="MsoNormal" style="text-align: center;" align="center"><b style=""><u><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US">TARIFF AND CUSTOMS CODE</span></u></b><u><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><o:p></o:p></span></u></p> <p class="MsoNormal" style="text-align: justify;"><b style=""><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><o:p> </o:p></span></b></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span><b style=""><span style=""> </span>1.<span style=""> </span><span style=""> </span>Customs duties defined.<span style=""> </span></b>Customs duties is the name given to taxes on the importation and exportation of commodities, the tariff or tax assessed upon merchandise imported from, or exported to, a foreign country.<span style=""> </span>(<i style="">Nestle Phils. v. Court of Appeals, et al.,</i> G.R. No. 134114, </span><st1:date month="7" day="6" year="2001"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US">July 6, 2001</span></st1:date><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US">)<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><o:p> </o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span><span style=""> </span><b style="">2.<span style=""> </span>Safeguard measures</b> are emergency measures, including tariffs, to protect domestic industries and producers from increased imports which inflict or could inflict serious injury on them.<o:p></o:p></span></p> <p class="MsoBodyText" style="margin-bottom: 0.0001pt; text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span>The CTA is vested with jurisdiction to review decisions of the Secretary of Trade and Industry imposing safeguard measures as provided under Rep. Act No. 8800 the Safeguard Measures Act (SMA).<span style=""> </span>(<i style="">Southern Cross Cement Corporation v. The Philippine Cement Manufacturers Corp., et al., </i>G. R. No. 158540, July 8, 2004)<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span>The DTI Secretary cannot impose the safeguard measures if the Tariff Commission does not favorably recommend its imposition.<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><o:p> </o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span><b style="">3.<span style=""> </span><span style=""> </span>What is mean by the term “entry” in Customs Law ?<o:p></o:p></b></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span><u>SUGGESTED ANSWER:</u><span style=""> </span></span><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">It has a triple meaning.<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>a.<span style=""> </span>the documents filed at the Customs house;<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>b.<span style=""> </span>the submission and acceptance of the documents; and<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>c.<span style=""> </span>Customs declaration forms or customs entry forms required to be accomplished by passengers of incoming vessels or passenger planes as envisaged under Sec. 2505 of the TCCP (Failure to declare baggage).<span style=""> </span>(<i style="">Jardeleza v. People, </i>G.R. No. 165265, </span><st1:date month="2" day="6" year="2006"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">February 6, 2006</span></st1:date><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">)<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><o:p> </o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><o:p> </o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><o:p> </o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><b style=""><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span>4.<span style=""> </span><span style=""> </span>A flight stewardess <span style=""> </span>arrived from </span></b><st1:country-region><st1:place><b style=""><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US">Singapore</span></b></st1:place></st1:country-region><b style=""><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US">.<span style=""> </span>Upon her arrival she was asked whether she has anything to declare.<span style=""> </span>She answered none, and she submitted her “Customs Baggage Declaration Form” which she accomplished and signed with nothing or written on the space for items to be declared.<span style=""> </span>When her hanger bag was examined some pieces of jewelry were found concealed within the lining of said bag.<o:p></o:p></span></b></p> <p class="MsoNormal" style="text-align: justify;"><b style=""><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span>She was then convicted of violating of Sec. 3601 of the Tariff and Customs Code for unlawful importation which penalizes any person who shall fraudulently import or bring into the </span></b><st1:country-region><st1:place><b style=""><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US">Philippines</span></b></st1:place></st1:country-region><b style=""><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"> any article contrary to law.<span style=""> </span><o:p></o:p></span></b></p> <p class="MsoNormal" style="text-align: justify;"><b style=""><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span>She now appeals claiming that lower court erred n convicting her under Sec. 3601 when the facts alleged both in the information and those shown by the prosecution constitute the offense under Sec. 2505 “Failure to Declare Baggage,” of which she was acquitted.<span style=""> </span>Is she correct ?<o:p></o:p></span></b></p> <p class="MsoNormal" style="text-align: justify;"><b style=""><i style=""><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span></span></i></b><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span><u>SUGGESTED ANSWER:</u><span style=""> </span>No.<span style=""> </span>Sec. 3601 does not define a crime.<span style=""> </span>It merely provides, <i style="">inter alia,</i> the administrative remedies which can be resorted to by the Bureau of Customs when seizing<span style=""> </span>dutiable articles found the baggage of any person arriving in the Philippines which is not included in the accomplished baggage declaration submitted to the customs authorities, and the administrative penalties that such person must pay for the release of such goods if not imported contrary to law.<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span>Such administrative penalties are independent of the criminal liability for smuggling that may be imposed under Sec. 3601, and other provisions of the TCC which can only be determined after the appropriate criminal proceedings, prescinding from the outcome in any administrative case that may have been filed and disposed of by the customs authorities. <o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span>Indeed the second paragraph of Sec. 2505 provides that nothing shall prevent the bringing of a criminal action against the offender for smuggling under Section 3601.<span style=""> </span>(<i style="">Jardeleza v. People,<span style=""> </span></i>G. R. No. 165265, February 6, 2006)<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span><o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><b style=""><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>5.<span style=""> </span>How is smuggling committed ?<o:p></o:p></span></b></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span><u>SUGGESTED ANSWER</u>:<span style=""> </span>Smuggling is committed by any person who:<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>a.<span style=""> </span>fraudulently imports or brings into the country any article contrary to law;<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>b.<span style=""> </span>assists in so doing any article contrary to law; or<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>c.<span style=""> </span>receives, conceals, buys, sells or in any manner facilitates the transportation, concealment or sale of such goods after importation, knowing the same to have been imported contrary to law.<span style=""> </span>(<i style="">Jardeleza v. People, </i>G.R. No. 165265, February 6, 2006 citing <i style="">Rodriguez v. Court of Appeals, </i>G. R. No. 115218, September 18, 1995, 248 SCRA 288, 296)<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span><o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span><b style=""><span style=""> </span>6.<span style=""> </span>The Collector of Customs sitting in seizure and forfeiture proceedings has exclusive jurisdiction to hear and determine all questions touching on the seizure and forfeiture of dutiable goods.<span style=""> </span>RTCs are precluded from assuming cognizance over such matters even through petitions of certiorari, prohibition or mandamus</b><i style="">.</i><span style=""> </span><i style="">(The Bureau of Customs, et al., v. Ogario, et al., </i>G.R. No. 138081,<span style=""> </span>March 20, 2000)<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span><b style="">What is the rationale for this doctrine ?<o:p></o:p></b></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span><u>SUGGESTED ANSWER:<o:p></o:p></u></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span>a.<span style=""> </span><span style=""> </span><span style=""> </span>Regional Trial Courts have no jurisdiction to replevin a property which is subject to seizure and forfeiture proceedings for violation of the Tariff and Customs Code otherwise, actions for forfeiture of property for violation of the Customs laws could easily be undermined by the simple device of replevin.<span style=""> </span>(<i style="">De la Fuente v. De Veyra, et al., </i>120 SCRA 455)<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span>b.<b style=""><span style=""> </span><span style=""> </span></b>The doctrine of exclusive customs jurisdiction over customs cases to the exclusion of the RTCs is anchored upon the policy of placing no unnecessary hindrance on the government’s drive, not only to prevent smuggling and other frauds upon Customs, <o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span>c.<span style=""> </span>but more importantly, to render effective and efficient the collection of import and export duties due the State, which enables the government to carry out the functions it has been instituted to perform.<span style=""> </span><i style="">(Jao, et al., v. Court of Appeals, et al., and companion case, </i>249 SCRA 35, 43)<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span>d.<span style=""> </span>The issuance by regular courts of writs of preliminary injunction in seizure and forfeiture proceedings before the Bureau of Customs may arouse suspicion that the issuance or grant was for consideration other than the strict merits of the case.<span style=""> </span>(<i style="">Zuno<span style=""> </span>v. Cabredo, </i>402 SCRA 75 [2003])<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span>e.<span style=""> </span>Under the doctrine of primary jurisdiction, the Bureau of Customs has exclusive administrative jurisdiction to conduct searches, seizures and forfeitures of contraband without interference from the courts. It could conduct searches and seizures without need of a judicial warrant except if the search is to be conducted in a dwelling place.<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span>Where an administrative office has obtained a technical expertise in a specific subject, even the courts must defer to this expertise.<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><o:p> </o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span><b style="">7.<span style=""> </span></b></span><b style=""><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">“A” claiming to be the owner of a vessel which is the subject of customs warrant of seizure and detention sought the intercession of the RTC to restrain the Bureau of Customs from interfering with his property rights over the vessel.<span style=""> </span>Would the suit prosper?<i style=""><o:p></o:p></i></span></b></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span><u>SUGGESTED ANSWER</u>:<span style=""> </span>No.<span style=""> </span>His remedy was not with the RTC but with the CTA, as issues of ownership of goods in the custody of customs officials are within the power of the CTA to determine.<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>The Collector of Customs has exclusive jurisdiction over seizure and forfeiture proceedings and trial courts are precluded from assuming cognizance over such matters even through petitions for certiorari, prohibition or mandamus.<span style=""> </span>(<i style="">Commissioner of Customs v. Court of Appeals, et al., </i>G. R. Nos. 111202-05, January 31, 2006)<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><b style=""><i style=""><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><o:p> </o:p></span></i></b></p> <p class="MsoNormal" style="text-align: justify;"><b style=""><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span>8.<span style=""> </span><span style=""> </span>The customs authorities do not have to prove to the satisfaction of the court that the articles on board a vessel were imported from abroad or are intended to be shipped abroad before they may exercise the power to effect customs searches, seizures, or arrests provided by law and continue with the administrative hearings</span></b><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US">.<b style=""> </b><i style="">(The Bureau of Customs, et al., v. Ogario, et al</i>., G.R. No. 138081, March 20, 2000)<i style=""><o:p></o:p></i></span></p> <p class="MsoNormal" style="text-align: justify;"><b style=""><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span></span></b><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span><b style="">9. <span style=""> </span>Instances where there is no right of redemption of seized and forfeited articles:<o:p></o:p></b></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span>a.<span style=""> </span>There is fraud;<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span>b. The importation is absolutely prohibited, or<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span>c.<span style=""> </span>The release of the property would be contrary to law. <i style="">(Transglobe International, Inc. v. Court of Appeals, et al., </i>G.R. No. 126634, January 25, 1999)<b style=""><o:p></o:p></b></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><o:p> </o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span><b style="">10.<span style=""> </span></b>In <i style="">Aznar v. Court of Tax Appeals, 58 SCRA 519</i>, reiterated in <i style="">Farolan, Jr. v. Court of Tax Appeals, et al., </i>217 SCRA 298, the Supreme Court clarified that<b style=""> the fraud contemplated by law must be actual and not constructive.</b><span style=""> </span>It must be intentional, consisting of deception, willfully and deliberately done or resorted to in order to induce another to give up some right.<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span><i style=""><o:p></o:p></i></span></p> <p class="MsoNormal" style="text-align: justify;"><b style=""><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span>11.<span style=""> </span><span style=""> </span>Requisites for forfeiture of imported goods:</span></b><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span>a.<span style=""> </span><span style=""> </span>Wrongful making by the owner, importer, exporter or consignee of any declaration or affidavit, or the wrongful making or delivery by the same person of any invoice, letter or paper – all touching on the importation or exportation of merchandise.<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span>b.<span style=""> </span><span style=""> </span>the falsity of such declaration, affidavit, invoice, letter or paper; and<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span>c.<span style=""> </span><span style=""> </span>an intention on the part of the importer/consignee to evade the payment of the duties due. <i style="">(Republic, etc., v. The Court of Appeals, et al</i>., G.R. No. 139050, October 2, 2001)<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><o:p> </o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span><b style="">12.<span style=""> </span>On January 7, 1989, the vessel M/V ”Star Ace, ”coming from Singapore laden with cargo, entered the Port of San Fernando, La Union for needed repairs.<span style=""> </span>When the Bureau of Customs later became suspicious that the vessel’s real purpose in docking was to smuggle cargo into the country, seizure proceedings were instituted<span style=""> </span>and subsequently two Warrants of Seizure and Detention were issued for the vessel and its cargo.<o:p></o:p></b></span></p> <p class="MsoNormal" style="text-align: justify;"><b style=""><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span>Cesar does not own the vessel or any of its cargo but claimed a preferred maritime lien.<span style=""> </span>Cesar then brought several cases in the RTC to enforce his lien.<span style=""> </span>Would these suits prosper ?<o:p></o:p></span></b></p> <p class="MsoNormal" style="text-align: justify;"><b style=""><i style=""><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span></span></i></b><u><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US">SUGGESTED ANSWER:</span></u><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span>No.<span style=""> </span>The Bureau of Customs having first obtained<span style=""> </span>possession of the vessel and its goods has obtained jurisdiction to the exclusion of the trial courts.<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span>When Cesar has impleaded the vessel as a defendant to enforce his alleged maritime lien, in the RTC, he brought an action <i style="">in rem </i>under the Code of Commerce under which the vessel may be attached and sold.<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span>However, the basic operative fact is the actual or constructive possession of the <i style="">res </i>by the tribunal empowered by law to conduct the proceedings.<span style=""> </span>This means that to acquire jurisdiction over the vessel, as a defendant, the trial court must have obtained either actual or constructive possession over it.<span style=""> </span>Neither was accomplished by the RTC as the vessel was already in the possession of the Bureau of Customs.<span style=""> </span>(<i style="">Commissioner of Customs v. Court of Appeals, et al., </i>G. R. Nos. 111202-05, January 31, 2006)<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span><o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><b style=""><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US">13.<span style=""> </span>What is the concept of assessments under the Tariff and Customs Code ?<o:p></o:p></span></b></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span><u>SUGGESTED ANSWER</u>: Assessments inform taxpayers of their tax liabilities. <o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>Under the TCCP, the assessment is in the form of a liquidation made on the face of the import entry return and approved by the Collector of Customs. (<i style="">Pilipinas Shell Petroleum Corporation v. Republic of the Philippines, etc., </i>G. R. No. 161953, March 6, 2008)<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><o:p> </o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><b style=""><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">14.<span style=""> </span>What is meant by liquidation ?<o:p></o:p></span></b></p> <p class="MsoNormal" style="text-align: justify;"><b style=""><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span></span></b><u><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">SUGGESTED ANSWER:</span></u><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>Liquidation is the <span style="">final computation and ascertainment by the Collector of Customs of the duties due on imported merchandise</span> based on official reports as to the quantity, character and value thereof, and the Collector of Customs' own finding as to the applicable rate of duty.<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span><span style=""> </span>A liquidation is considered to have been made when the entry is officially stamped “liquidated.”<span style=""> </span>(<i style="">Pilipinas Shell Petroleum Corporation v. Republic of the Philippines, etc., </i>G. R. No. 161953, March 6, 2008)<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><o:p> </o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><b style=""><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">15.<span style=""> </span>When assessment or liquidation made by the Bureau of Customs attains finality and conclusiveness.<span style=""> </span></span></b><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">An assessment or liquidation by the Bureau of Customs attains finality and conclusiveness one year from the date of the final payment of duties except when: <o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>a.<span style=""> </span>there was fraud;<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>b.<span style=""> </span>there is a pending protest or <o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>c.<span style=""> </span>the liquidation of import entry was merely tentative.<span style=""> </span>(<i style="">Pilipinas Shell Petroleum Corporation v. Republic of the Philippines, etc., </i>G. R. No. 161953, March 6, 2008)<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><o:p> </o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><b style=""><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">16.<span style=""> </span>Instance when the Bureau of Customs would utilize its remedy of filing a civil suit for collection of taxes.<span style=""> </span></span></b><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">Import duties constitute a personal debt of the importer that must be paid in full. The importer’s liability therefore constitutes a lien on the article which the government may choose to enforce while the imported articles are either in its custody or under its control.<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>When Bureau of Customs has released the imported goods, its<span style=""> </span>lien over the imported goods was extinguished. Consequently, Bureau of Customs could only enforce the payment of<span style=""> </span>import duties in full by filing a case for collection against importer.<span style=""> </span>(<i style="">Pilipinas Shell Petroleum Corporation v. Republic of the Philippines, etc., </i>G. R. No. 161953, March 6, 2008)<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><o:p> </o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><b style=""><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US">17.<span style=""> </span>Despite the holding in </span></b><b style=""><i style=""><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">Pilipinas Shell Petroleum Corporation v. Republic of the Philippines, etc., </span></i></b><b style=""><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">G. R. No. 161953, March 6, 2008, </span></b><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">the distribution of jurisdiction for collection cases involving tariff and customs duties is as follows:<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>a.<span style=""> </span>Basic tax does not exceed P300,000.00 MTC if outside of Metro Manila; does not exceed P400,000.00 MTC if within Metro Manila;<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>b. <span style=""> </span>Basic tax exceeds P300,000 but does not reach P1 million RTC if outside Metro Manila, exceeds P400,000.00 but does not reach P1 million RTC if within Metro Manila;<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>c.<span style=""> </span>Basic tax is P1 million or over, Court of Tax Appeals, Division.</span><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span><i style="">Pilipinas Shell </i>ruled that jurisdiction vested upon the RTC because it was interpreting the CTA jurisdiction prior to the amendment of Rep. Act No. 1125.<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><o:p> </o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><b style=""><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>18.<span style=""> </span>Importation begins when the conveying vessel or aircraft enters the jurisdiction of<span style=""> </span>the Philippines with intention to unlade therein</span></b><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">. (Sec. 1202, TCCP)<span style=""> </span>The jurisdiction of the Bureau of Customs to enforce the provisions of the TCCP including seizure and forfeiture also begins from the beginning of importation.<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify; text-indent: 0.5in;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><o:p> </o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span><b style="">19.<span style=""> </span>Importation is deemed terminated upon payment of the duties, taxes and other charges due upon the agencies, or secured to be paid, at the port of entry and the legal permit for withdrawal shall have been granted.</b><span style=""> </span><o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>In case the articles are free of duties, taxes and other charges, until they have legally left the jurisdiction of the customs.<span style=""> </span>(Sec. 1202, TCCP)<span style=""> </span>The Bureau of Customs loses jurisdiction to enforce the TCCP and to make seizures and forfeitures after importation is deemed terminated.<o:p></o:p></span></p> <p class="MsoNormal" style=""><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><o:p> </o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span><span style=""> </span><b style=""><i style=""><span style=""> </span></i>20.<span style=""> </span></b>The flexible tariff clause is a provision in the Tariff and Customs Code, which implements the constitutionally delegated power to the President of the Philippines, in the interest of national economy, general welfare and/or national security<span style=""> </span>upon recommendation of the NEDA (a) to increase, reduce or remove existing protective rates of import duty, provided that, the increase should not be higher than 100% ad valorem; (b) to establish import quota or to ban imports of any commodity, and (c) to impose additional duty on all imports not exceeding 10% ad valorem, among others.<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><o:p> </o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span><b style=""><span style=""> </span>21.<span style=""> </span><span style=""> </span>Customs duties defined.<span style=""> </span></b>Customs duties is the name given to taxes on the importation and exportation of commodities, the tariff or tax assessed upon merchandise imported from, or exported to, a foreign country.<span style=""> </span>(<i style="">Nestle Phils. v. Court of Appeals, et al.,</i> G.R. No. 134114, July 6, 2001)<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><o:p> </o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span><b style=""><span style=""> </span>22.<span style=""> </span>Special customs duties are additional import duties imposed on specific kinds of<span style=""> </span>imported articles under certain conditions</b>.<span style=""> </span>The special customs duties under the Tariff and Customs Code (TCCP) are the anti-dumping duty, the countervailing duty, the discriminatory duty, and the marking duty, and under the Safeguard Measures Act (SMA) additional tariffs as safeguard measures.<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><o:p> </o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span><b style="">23.<span style=""> </span>The special customs duties are imposed for the protection of consumers and manufacturers, as well as Philippine products.<o:p></o:p></b></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><o:p> </o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><b style=""><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>24.<span style=""> </span>Dumping duty is an additional special duty amounting to the difference between the export price and the normal value of such product, commodity or article</span></b><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>(Sec. 301 (s) (1), TCC, as amended by<span style=""> </span>Rep. Act No. 8752, “Anti-Dumping Act of 1999.”) imposed on the importation of a product, commodity or article of commerce into the Philippines at less than its normal value when destined for domestic consumption in the exporting<span style=""> </span>country which is causing or is threatening to cause material injury to a domestic industry, or materially retarding the establishment of a domestic industry producing the like product.<span style=""> </span>[Sec. 301 (s) (5), TCC, as amended by Rep. Act No. 8752, “Anti-Dumping Act of 1999”]<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><o:p> </o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span><span style=""> </span><b style="">25.<span style=""> </span>The anti-dumping duty is imposed <o:p></o:p></b></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>a.<span style=""> </span>Where a product, commodity or article of commerce is exported into the Philippines at a price less than its normal value when destined for domestic consumption in the exporting country,<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>b.<span style=""> </span>and such exportation is causing or is threatening to cause material injury to a domestic industry, or materially retards the establishment of a domestic industry producing the like product.<span style=""> </span>[Sec. 301 (a), TCC, as amended by<span style=""> </span>Rep. Act No. 8752, “Anti-Dumping Act of 1999”]<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span><o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span><b style="">26.<span style=""> </span><span style=""> </span>Normal value for purposes of imposing the anti-dumping duty</b> is the comparable price at the date of sale of like product, commodity, or article in the ordinary course of trade when destined for consumption in the country of export.<span style=""> </span>[Sec. 301 (s) (3 ), TCC, as amended by Rep. Act No. 8752, “Anti-Dumping Act of 1999”]<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><o:p> </o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><b style=""><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>27.<span style=""> </span><span style=""> </span>A dumped imported product is any product, commodity or article of commerce introduced into the Philippines at an export price less than its normal value in the ordinary course of trade, for the like product, commodity or article destined for consumption in the exporting country, which is causing or is threatening to cause material injury to a domestic industry, or materially retarding the establishment of a domestic industry producing the like product.</span></b><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>[Sec. 301 (s) (5), TCC, as amended by Rep. Act No. 8752, “Anti-Dumping Act of 1999”]<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify; text-indent: 0.5in;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><o:p> </o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><b style=""><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>28. The imposing authority for the anti-dumping duty is the Secretary of Trade and Industry in the case of non-agricultural product, commodity, or article or the Secretary of Agriculture, in the case of agricultural product, commodity or article,</span></b><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"> after formal investigation and affirmative finding of the Tariff Commission. [Sec. 301 (a), TCC, as amended by Rep. Act No. 8752, “Anti-Dumping Act of 1999”]<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify; text-indent: 0.5in;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><o:p> </o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span><b style="">29.<span style=""> </span>Even when all the requirements for the imposition have been fulfilled, the decision on whether or not to impose a definitive anti-dumping duty remains the prerogative of the Tariff Commission</b>.<span style=""> </span>[Sec. 301 (a), TCC, as amended by Rep. Act No. 8752, “Anti-Dumping Act of 1999”]<span style=""> </span>Thus, the cabinet secretaries could not contravene the<span style=""> </span>recommendation of the Tariff Commission.<span style=""> </span>They could not impose the anti-dumping duty or any special customs duty without the favorable recommendation of the Tariff Commission.<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><o:p> </o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><b style=""><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>30.<span style=""> </span>In the determination of whether to impose the anti-dumping duty, the Tariff Commission, may consider among others, the effect of imposing an anti-dumping duty on the welfare of the consumers and/or the general public, and other related local industries.</span></b><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>(Sec. 301 (a), TCC, as amended by Rep. Act No. 8752, “Anti-Dumping Act of 1999”)<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify; text-indent: 0.5in;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><o:p> </o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span><b style=""><span style=""> </span>31.<span style=""> </span>The amount of anti-dumping duty that may be imposed<i style=""> </i>is the difference between the export price and the normal value of such product, commodity or article.<span style=""> </span></b>(Sec. 301 (s) (1), TCC, as amended by Rep. Act No. 8752, “Anti-Dumping Act of 1999”)<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>The anti-dumping duty shall be equal to the margin of dumping on such product, commodity or article thereafter imported to the Philippines under similar circumstances, in addition to ordinary duties, taxes and charges imposed by law on the imported product, commodity or article.<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><o:p> </o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><b style=""><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>32.<span style=""> </span>Countervailing duties </span></b><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">are additional customs duties imposed on any product, commodity or article of commerce which is granted directly or indirectly by the government in the country of origin or exportation, any kind or form of specific subsidy upon the production, manufacture or exportation of such product commodity or article, and the importation of such subsidized product, commodity, or article has caused or threatens to cause material injury to a domestic industry or has materially retarded the growth or prevents the establishment of a domestic industry.<b style=""> </b><span style=""> </span>(Sec. 302, TCCP as amended by Section 1, R.A. No. 8751)<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><o:p> </o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><b style=""><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>33.<span style=""> </span>The imposing authority for the countervailing duties is the<span style=""> </span>Secretary of Trade and Industry in the case of non-agricultural product, commodity, or article or the Secretary of Agriculture, in the case of agricultural product, commodity or article,</span></b><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"> after formal investigation and affirmative finding of the Tariff Commission.<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>Even when all the requirements for the imposition have been fulfilled, the decision on whether or not to impose a definitive anti-dumping duty remains the prerogative of the Tariff Commission.<span style=""> </span>(Sec. 301 (a), TCC, as amended by Rep. Act No. 8752, “Anti-Dumping Act of 1999”)<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span><o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span><b style="">34.<span style=""> </span>The countervailing duty is equivalent to the value of the specific subsidy.<o:p></o:p></b></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><o:p> </o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><b style=""><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span><span style=""> </span>35.<span style=""> </span>Marking duties </span></b><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">are the additional customs duties imposed on foreign articles (or its containers if the article itself cannot be marked), not marked in any official language in the Philippines, in a conspicuous place as legibly, indelibly and permanently in such manner as to indicate to an ultimate purchaser in the Philippines the name of the country of origin.<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span><b style=""><i style=""><o:p></o:p></i></b></span></p> <p class="MsoNormal" style="text-align: justify;"><b style=""><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>36.<span style=""> </span>The Commissioner of Customs imposes the marking duty.<o:p></o:p></span></b></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><o:p> </o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span><b style="">37.<span style=""> </span>The marking duty is equivalent to five percent (5%) ad valorem.<o:p></o:p></b></span></p> <p class="MsoNormal" style="text-align: justify;"><b style=""><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><o:p> </o:p></span></b></p> <p class="MsoNormal" style="text-align: justify;"><b style=""><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>38.<span style=""> </span>A discriminatory duty </span></b><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">is a<span style=""> </span>new and additional customs duty imposed upon articles wholly or in part the growth or product of, or imported in a vessel, of any foreign country which imposes, directly or indirectly, upon the disposition or transportation in transit through or reexportation from such country of any article wholly or in part the growth or product of the Philippines, any unreasonable charge, exaction, regulation or limitation which is not equally enforced upon like articles of every foreign country, or discriminates against the commerce of the Philippines, directly or indirectly, by law or administrative regulation or practice, by or in respect to any customs, tonnage, or port duty, fee, charge, exaction, classification, regulation, condition, restriction or prohibition, in such manner as to place the commerce of the Philippines at a disadvantage compared with the commerce of any foreign country.<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><o:p> </o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span><span style=""> </span><b style="">39.<span style=""> </span>The President of the Philippines imposes the discriminatory duties.</b><o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><o:p> </o:p></span></p> <p class="MsoBodyText" style="margin-bottom: 0.0001pt; text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span><b style="">40.<span style=""> </span>Safeguard measures</b> are emergency measures, including tariffs, to protect domestic industries and producers from increased imports which inflict or could inflict serious injury on them.<o:p></o:p></span></p> <p class="MsoBodyText" style="margin-bottom: 0.0001pt; text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>The CTA is vested with jurisdiction to review decisions of the Secretary of Trade and Industry imposing safeguard measures as provided under Rep. Act No. 8800 the Safeguard Measures Act (SMA).<span style=""> </span>(<i style="">Southern Cross Cement Corporation v. The Philippine Cement Manufacturers Corp., et al., </i>G. R. No. 158540, July 8, 2004)<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>The DTI Secretary cannot impose the safeguard measures if the Tariff Commission does not favorably recommend its imposition.<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><o:p> </o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span><b style="">41.<span style=""> </span>Imposing authority for safeguard measures.<span style=""> </span>The imposing authority for the countervailing duties is the<span style=""> </span>Secretary of Trade and Industry in the case of non-agricultural product, commodity, or article or the Secretary of Agriculture, in the case of agricultural product, commodity or article,</b> after formal investigation and affirmative finding of the Tariff Commission.<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><b style=""><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><o:p> </o:p></span></b></p> <p class="MsoNormal" style="text-align: justify;"><b style=""><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>42.<span style=""> </span>Safeguards measures that may be imposed.<span style=""> </span></span></b><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">Additional tariffs, import quotas or banning of imports.<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><o:p> </o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><b style=""><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>43.<span style=""> </span>Payment under protest required where additional duties, taxes, fees or other charges are imposed by the Collector otherwise taxpayer could not obtain refund. </span></b><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">When a ruling or decision of the collector is made whereby liability for duties, taxes, fees, or other charges are determined, except the fixing of fines in seizure cases, the party adversely affected may protest such ruling or decision <o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>a. <span style=""> </span>by presenting to the Collector at the time when payment is made, or within fifteen (15) days thereafter, <o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>b.<span style=""> </span><span style=""> </span>a written protest setting forth his objection to the ruling or decision in question, together with his reasons therefor.<span style=""> </span>No protest shall be considered unless payment of the amount due after final liquidation has first been made and the corresponding docket fee.<span style=""> </span>(Sec. 2308, TCC numbering and arrangement supplied)<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span><o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify; text-indent: 0.5in;"><b style=""><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">44</span></b><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">.<span style=""> </span><b style="">Protest Exclusive Remedy in Protestable Cases.<span style=""> </span></b>In all cases subject to protest, the interested party who desires to have the action of the collector reviewed, shall make a protest, otherwise the action of the collector shall be final and conclusive against him.<span style=""> </span>(Sec. 2309, TCC)<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><o:p> </o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span><b style=""><span style=""> </span>45</b>.<span style=""> </span><b style="">The basis of dutiable value of merchandise that is subject to ad valorem customs duties<i style=""> </i>the transaction value,</b> which shall be the price actually paid or payable for the goods when sold for export to the Philippines, adjusted by adding certain cost elements to the extent that they are incurred by the buyer but are not included in the price actually paid or payable for the imported goods, and may include the following:<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>a.<span style=""> </span><span style=""> </span>Cost of containers and packing,<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>b.<span style=""> </span><span style=""> </span>Insurance, and<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>c.<span style=""> </span><span style=""> </span>Freight.<span style=""> </span>(Sec. 201, TCC as amended by Sec. 1, Rep. Act No. 9135)<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><o:p> </o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><b style=""><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>46.<span style=""> </span>The above transaction value is the primary method of determining dutiable value.<span style=""> </span>If the transaction value of the imported article could not be determined using the above,<span style=""> </span>the following alternative methods should be used one after the other:<o:p></o:p></span></b></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>a.<span style=""> </span><span style=""> </span>Transaction value of identical goods<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>b.<span style=""> </span><span style=""> </span>Transaction value of similar goods<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>c.<span style=""> </span><span style=""> </span>Deductive method<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>d.<span style=""> </span><span style=""> </span>Computed method<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>e.<span style=""> </span><span style=""> </span>Fallback method<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><o:p> </o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span><b style="">47.<span style=""> </span><span style=""> </span>There is a mistaken belief that claims for refund are governed by the rule on quasi-contract of <i style="">solutio indebeti</i> which prescribes in six (6) years under Article 1145 of the Civil Code.<o:p></o:p></b></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>In order for the rule on <i style="">solutio indebeti</i> to apply it is an essential condition that the petitioner must first show that its payment of the customs duties was in excess of what was required by the law at the time the subject 16 importations of milk and milk products were made.<span style=""> </span>Unless shown otherwise, the disputable presumption of regularity of performance of duty lies in favor of the Collector of Customs. <i style="">(Nestle Phil. v. Court of Appeals, et al., G.R. No. 134114, July 6, 2001)<o:p></o:p></i></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><o:p> </o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><b style=""><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>48.<span style=""> </span>There is no automatic grant of refund.</span></b><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>In determining whether Nestle is entitled to refund of alleged overpayment of custom duties, it is necessary to determine exactly how much the Government is entitled to collect as customs duties.<span style=""> </span>Until there is such a determination by the Collector and affirmed or rejected by the Commissioner, then the Court of Tax Appeals does not have jurisdiction. The CTA’s jurisdiction under the Tariff and Customs Code is not concurrent with that of the Commissioner of Customs due to the absence of any certification from the Collector of Customs of Manila that such import duties should be refunded.<span style=""> </span>Consequently, the finding by the CTA in another case of overpayment of internal revenue taxes is not necessarily a finding that there was overpayment of customs duties.<span style=""> </span><i style="">(Nestle Phil. v. Court of Appeals, et al., G.R. No. 134114, July 6, 2001)<o:p></o:p></i></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span><o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><b style=""><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>49.<span style=""> </span>All claims for refund of duties shall be made in writing and forwarded to the Collector of Customs to whom such duties are paid</span></b><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">, who upon receipt of such claim, shall verify the same by the records of his Office, and if found to be correct and in accordance with law, shall certify the same to the Commissioner of Customs with his recommendation together with all necessary papers and documents.<span style=""> </span>Upon receipt by the Commissioner of such certified claim he shall cause the same to be paid if found correct.<span style=""> </span>(Sec. 1708, TCC)<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><b style=""><i style=""><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><o:p> </o:p></span></i></b></p> <p class="MsoNormal" style="text-align: justify;"><b style=""><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>50.<span style=""> </span>Under the doctrine of primary jurisdiction, the Bureau of Customs has exclusive administrative jurisdiction to conduct searches, seizures and forfeitures of contraband without interference from the courts. It could conduct searches and seizures without need of a judicial warrant except if the search is to be conducted in a dwelling place.<o:p></o:p></span></b></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><o:p> </o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span><b style=""><span style=""> </span>51.<span style=""> </span>The doctrine of exclusive customs jurisdiction over customs cases to the exclusion of the RTCs is anchored upon the policy of placing no unnecessary hindrance on the government’s drive, not only to prevent smuggling and other frauds upon Customs, but more importantly, to render effective and efficient the collection of import and export duties due the State, which enables the government to carry out the functions it has been instituted to perform.</b><span style=""> </span><i style="">(Jao, et al., v. Court of Appeals, et al., and companion case, </i>249 SCRA 35, 43)<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><o:p> </o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><b style=""><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>52.<span style=""> </span>The Collector of Customs sitting in seizure and forfeiture proceedings has exclusive jurisdiction to hear and determine all questions touching on the seizure and forfeiture of dutiable goods.<span style=""> </span>RTCs are precluded from assuming cognizance over such matters even through petitions of certiorari, prohibition or mandamus</span></b><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">.<span style=""> </span><i style="">(The Bureau of Customs, et al., v. Ogario, et al., </i>G.R. No. 138081,<span style=""> </span>March 20, 2000)<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span><o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span><b style="">53</b>.<span style=""> </span>Regional Trial Courts have no jurisdiction to replevin a property which is subject to seizure and forfeiture proceedings for violation of the Tariff and Customs Code otherwise, actions for forfeiture of property for violation of the Customs laws could easily be undermined by the simple device of replevin.<span style=""> </span>(<i style="">De la Fuente v. De Veyra, et al., </i>120 SCRA 455)<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><o:p> </o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><b style=""><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>54.<span style=""> </span><span style=""> </span>The customs authorities do not have to prove to the satisfaction of the court that the articles on board a vessel were imported from abroad or are intended to be shipped abroad before they may exercise the power to effect customs searches, seizures, or arrests provided by law and continue with the administrative hearings</span></b><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">.<b style=""> </b><i style="">(The Bureau of Customs, et al., v. Ogario, et al</i>., G.R. No. 138081, March 20, 2000)<i style=""><o:p></o:p></i></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><o:p> </o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><b style=""><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span><span style=""> </span>55.<span style=""> </span></span></b><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">The Tariff and Customs Code allows the Bureau of Customs to resort to the <b style="">administrative remedy of seizure, such as by enforcing the tax lien on the imported article when the imported articles could be found and be subject to seizure and forfeiture.<o:p></o:p></b></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><o:p> </o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><b style=""><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>56.<span style=""> </span></span></b><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">The Tariff and Customs Code allows the Bureau of Customs to resort to the <b style="">judicial remedy of filing an action in court<i style=""> </i>when the imported articles could not anymore be found.<o:p></o:p></b></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><o:p> </o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span><b style="">57. <span style=""> </span>Instances where there is no right of redemption of seized and forfeited articles:<o:p></o:p></b></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>a.<span style=""> </span>There is fraud;<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>b. The importation is absolutely prohibited, or<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>c.<span style=""> </span>The release of the property would be contrary to law. <i style="">(Transglobe International, Inc. v. Court of Appeals, et al., </i>G.R. No. 126634, January 25, 1999)<b style=""><o:p></o:p></b></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><o:p> </o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span><b style="">58.<span style=""> </span></b>In <i style="">Aznar v. Court of Tax Appeals, 58 SCRA 519</i>, reiterated in <i style="">Farolan, Jr. v. Court of Tax appeals, et al., 217 SCRA 298</i>, the Supreme Court clarified that<b style=""> the fraud contemplated by law must be actual and not constructive.</b><span style=""> </span>It must be intentional, consisting of deception, willfully and deliberately done or resorted to in order to induce another to give up some right.<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><o:p> </o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span><b style="">59. <span style=""> </span>Fraud must be proved to justify forfeiture.</b><span style=""> </span>It must be actual, amounting to intentional wrong-doing with the clear purpose of avoiding the tax.<span style=""> </span>Forfeiture is not favored in law nor in equity.<span style=""> </span>Mere negligence is not equivalent to the fraud contemplated by law.<span style=""> </span>An honest mistake, will not deprive the government of its right to collect the proper tax.<span style=""> </span><i style="">(Republic, etc., v. The Court of Appeals, et al</i>., G.R. No. 139050, October 2, 2001)<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><i style=""><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><o:p> </o:p></span></i></p> <p class="MsoNormal" style="text-align: justify;"><b style=""><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>60.<span style=""> </span><span style=""> </span>Requisites for forfeiture of imported goods:</span></b><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>a.<span style=""> </span><span style=""> </span>Wrongful making by the owner, importer, exporter or consignee of any declaration or affidavit, or the wrongful making or delivery by the same person of any invoice, letter or paper – all touching on the importation or exportation of merchandise.<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>b.<span style=""> </span><span style=""> </span>the falsity of such declaration, affidavit, invoice, letter or paper; and<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>c.<span style=""> </span><span style=""> </span>an intention on the part of the importer/consignee to evade the payment of the duties due. <i style="">(Republic, etc., v. The Court of Appeals, et al</i>., G.R. No. 139050, October 2, 2001)<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify; text-indent: 0.5in;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><o:p> </o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><b style=""><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>61.<span style=""> </span>Forfeiture of seized goods in the Bureau of Customs is in the nature of a proceeding <i style="">in rem</i>,</span></b><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"> i.e. directed against the <i style="">res </i>or imported goods and entails a determination of the legality of their importation.<span style=""> </span>In this proceeding, it is in legal contemplation the property itself which commits the violation and is treated as the offender, without reference whatsoever to the character or conduct of the owner.<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>The issue is limited to whether the imported goods should be forfeited and disposed of in accordance with law for violation of the Tariff and Customs Code. <i style="">.(Transglobe International, Inc. v. Court of Appeals, et al</i>., G.R. No. 126634, January 25, 1999)<span style=""> </span><o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><i style=""><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><o:p> </o:p></span></i></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span><b style="">62.<span style=""> </span><span style=""> </span>The one-year prescriptive period for forfeiture proceedings applies only in the absence of fraud.</b><span style=""> </span><i style="">(Commissioner of Customs v. Court of Tax Appeals, et al., </i>G.R. No. 132929, </span><st1:date month="3" day="27" year="2000"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">March 27, 2000</span></st1:date><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">)<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><o:p> </o:p></span></p> <p class="MsoBodyText" style="margin-bottom: 0.0001pt; text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span><b style="">63.<span style=""> </span>The posting of customs guards at the importer’s warehouse where the imported steel billets were transferred under guard from the customs zone is an indication that the goods were not yet released by the Bureau of Customs to the importer and that importation has not yet been terminated.</b><o:p></o:p></span></p> <p class="MsoBodyText" style="margin-bottom: 0.0001pt; text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>However, when the Bureau of Customs allowed the processing of the import entry, accepted the payment and issued an order of release such order is sufficient legal permit for withdrawal and importation is then deemed terminated.<span style=""> </span>The goods could not anymore be seized and forfeited because importation has been validly terminated.<span style=""> </span>(Sandoval-Gutierrez J. <i style="">Commissioner of Customs v. Milwaukee Industrial Corporation, </i>G. R. No. 135253, December 9, 2004)<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><o:p> </o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span><b style="">64.<span style=""> </span>The Collector of Customs upon probable cause that the articles are imported or exported, or are attempted to be imported or exported, in violation of the tariff and customs laws shall issue a warrant of seizure.<span style=""> </span></b>(Sec. 6, Title III, CAO No. 9-93)<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>If the search and seizure is to be conducted in a dwelling place, then a search warrant should be issued by the regular courts <u>not</u> the Bureau of Customs.<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>There may be instances where no warrants issued by the Bureau of Customs or the regular courts is required, as in search and seizures of motor vehicles and vessels.<b style=""><o:p></o:p></b></span></p> <p class="MsoNormal" style=""><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><o:p> </o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span><b style="">65.<span style=""> </span>Smuggled goods seized by virtue of a court warrant should be surrendered to the court that issued the warrant and not to the Bureau of Customs </b>because the goods are in <i style="">custodia legis.<o:p></o:p></i></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><o:p> </o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><o:p> </o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 11pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span></span><b style=""><u><span style="font-size: 14pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US">REPUBLIC ACT NO. 1125, CREATING THE COURT OF TAX APPEALS INCLUDING JURISDICTION OF THE CTA,<span style=""> </span>AS AMENDED</span></u></b><span style="font-size: 14pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 11pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span><o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><b style=""><span style="font-size: 11pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span></span></b><b style=""><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US">1.<span style=""> </span><span style=""> </span>Why was the Court of Tax Appeals created ?<o:p></o:p></span></b></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span><u>SUGGESTED ANSWER:<o:p></o:p></u></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span>a.<span style=""> </span>To prevent delay in the disposition of tax cases by the then Courts of First Instance (now RTCs), in view of the backlog of civil, criminal, and cadastral cases accumulating in the dockets of such courts; and<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span>b.<span style=""> </span><span style=""> </span>To have a body with special knowledge which ordinary Judges of the then Courts of First Instance (now RTCs), are not likely to possess, thus providing for an adequate remedy for a speedy determination of tax cases.<span style=""> </span>(<i style="">Ursal v. Court of Tax Appeals, et al., </i>101 Phil. 209; <i style="">Lacsamana, et al., etc., v. CTA, et al., </i>102 Phil. 931)<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><o:p> </o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span><b style="">2.<span style=""> </span>CTA specialized court.<span style=""> </span></b>By the very nature of its functions, the CTA is a highly specialized court specifically created for the purpose of reviewing tax and customs cases.<span style=""> </span>it is dedicated exclusively to the study and consideration of revenue-related problems and has necessarily developed an expertise on the subject.<span style=""> </span>(J. Panganiban in <i style="">Southern Cross Cement Corporation v. Cement Manufacturers Association of the </i></span><st1:country-region><st1:place><i style=""><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US">Philippines</span></i></st1:place></st1:country-region><i style=""><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US">, et al., </span></i><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US">G. R. No. 158540, </span><st1:date month="8" day="3" year="2005"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US">August 3, 2005</span></st1:date><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US">, citing various cases in his separate opinion to the decision on the motion for reconsideration)<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span><o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span><b style="">3.</b><span style=""> </span><b style="">Court of Tax Appeals’ finding of fact binds the Supreme Court.</b><span style=""> </span></span><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">It is doctrinal that the factual findings of the Court of Tax Appeals, when supported by substantial evidence, will not be disturbed on appeal, unless it is shown that it committed gross error in the appreciation of facts.</span><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"> (<i style="">Commissioner of Internal Revenue v. Manila Electric Company,<b style=""> </b></i>G. R. No. 121666, October 10, 2007 citing <i>Commissioner of Internal Revenue v. Court of Appeals</i>, G.R. No. 124043, October 14, 1998, 298 SCRA 83, 91 citing <i>Commissioner of Internal Revenue v. Mitsubishi Metal Corp.,</i> G.R. Nos. 54909 and 80041, January 22, 1990, 181 SCRA 214, 220;<span style=""> </span><i>Philippine Refining Company v. Court<span style=""> </span>Commissioner of Internal Revenue v. Court of Appeals</i>, G.R. No. 124043, October 14, 1998, 298 SCRA 83, 91 citing <i>Commissioner of Internal Revenue v. Mitsubishi Metal Corp.,</i> G.R. Nos. 54909 and 80041, January 22, 1990, 181 SCRA 214, 220;<span style=""> </span><i>Philippine Refining Company v. Court<span style=""> </span>of Appeals,</i> G.R. No. 118794, May 8, 1996, 256 SCRA 667, 676)<o:p></o:p></span></p> <p class="MsoFootnoteText" style="text-align: justify; text-indent: -0.25in;"><i><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span><span style=""> </span></span></i><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">Hence, as a matter of practice and principle, the Supreme Court will not set aside the conclusion reached by the Court of Tax Appeals, especially if affirmed by the Court of Appeals as in the present case.<span style=""> </span>For by the nature of its functions, the tax court dedicates itself to the study and consideration of tax problems and necessarily develops expertise thereon, unless there has been an abuse or improvident exercise of authority on its part. (<i style="">Ibid. </i>citing </span><i><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">Compagnie Financiere Sucres et Denrees v. Commissioner of Internal Revenue</span></i><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">, G.R. No. 133834, August 28, 2006, 499 SCRA 664, 669; <i>Commissioner of Internal Revenue v. General Foods (Phils.) Inc.,</i> G.R. No. 143672, </span><st1:date month="4" day="24" year="2003"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">April 24, 2003</span></st1:date><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">, 401 SCRA 545, 553.<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><o:p> </o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span><b style="">4.<span style=""> </span>Court of Tax Appeals is not governed strictly by technical rules of evidence.<span style=""> </span></b>(Sec. 8, Rep. Act No. 1125)<span style=""> </span>While this may be so rules of procedure are not ends in themselves but are primarily intended as tools in the administration of justice, the presentation of the purchase receipts and/or invoices is not mere procedural technicality which may be disregarded considering that it is the only means by which the CTA may ascertain and verify the truth of the taxpayer’s claims.<span style=""> </span>(<i style="">Commissioner of Internal<span style=""> </span>v. Manila Mining Corporation, </i>G. R. No. 153204, </span><st1:date month="8" day="31" year="2005"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US">August 31, 2005</span></st1:date><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US">)<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span></span><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">Under Section 8 of RA 1125, the CTA is categorically described as a court of record. As cases filed before it are litigated <i>de novo</i>, party-litigants shall prove every minute aspect of their cases. Indubitably, no evidentiary value can be given the pieces of evidence submitted by the BIR, as the rules on documentary evidence require that these documents must be formally offered before the CTA.<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>While the CTA is not governed strictly by technical rules of evidence, as rules of procedure are not ends in themselves and are primarily intended as tools in the administration of justice, the presentation of the BIR's evidence is not a mere procedural technicality which may be disregarded considering that it is the only means by which the CTA may ascertain and verify the truth of BIR's claims. (<i style="">Dizon, etc., v. Court of Tax Appeals, et al., </i>G.R. No. 140944, April 30, 2008)<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><o:p> </o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><b style=""><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>5.<span style=""> </span>The legal remedies under the NIRC of 1997 and other laws</span></b><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"> available to an aggrieved taxpayer may be classified into the tax remedies with respect to: <o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>a.<span style=""> </span>assessment;<span style=""> </span><o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>b.<span style=""> </span>collection, and<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>c.<span style=""> </span>refund of internal revenue taxes.<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify; text-indent: 0.5in;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">The remedies may also be classified into the administrative or the judicial remedies.<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><o:p> </o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><b style=""><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>6.<span style=""> </span>The legal remedies under the NIRC of 1997 available to an aggrieved taxpayer at the <u>administrative level</u></span></b><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"> with respect to <b style=""><u>assessment of internal revenue taxes</u></b> are the following:<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>a. <span style=""> </span>Upon receipt of a pre-assessment notice, the taxpayer shall respond to the same within fifteen (15) days from receipt which is the period provided for by implementing rules and regulations.<span style=""> </span>[3<sup>rd</sup> par., Sec. 228 (e), NIRC of 1997]<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>b.<span style=""> </span><span style=""> </span>Upon the issuance of an assessment notice, the taxpayer shall protest administratively by filing a request for reconsideration or reinvestigation within thirty (30) days from receipt of the assessment in such form and manner as may be prescribed by implementing rules and regulations.<span style=""> </span><o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>c.<span style=""> </span>Within sixty (60) days from the filing of the protest, all relevant supporting documents shall be submitted; otherwise the assessment shall become final.<span style=""> </span>(4<sup>th</sup> par., <i style="">Ibid.</i>)<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify; text-indent: 0.5in;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><o:p> </o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span><b style="">7.<span style=""> </span>The legal remedies under the NIRC of 1997 available to an aggrieved taxpayer at the <u>judicial level</u> </b>with respect to <u>assessment of internal revenue taxes:<span style=""> </span><o:p></o:p></u></span></p> <p class="MsoNormal" style="text-align: justify; text-indent: 0.5in;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">a.<span style=""> </span>If the protest is denied in whole or in part, or <o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify; text-indent: 0.5in;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">b. is not acted upon within one hundred eighty (180) days from submission of documents, <o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify; text-indent: 0.5in;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">c.<span style=""> </span>the taxpayer adversely affected by the decision or inaction may appeal to the Court of Tax Appeals within thirty (30) days from receipt of the said decision, or from the lapse of the one hundred eighty (180) – day period; otherwise, the decision shall become final, executory and demandable.<span style=""> </span>[last par., Sec. 228 (e), NIRC of 1997]<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify; text-indent: 0.5in;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">d.<span style=""> </span>On appeal, the taxpayer should apply for the issuance of a writ of preliminary injunction to enjoin the BIR from collecting the tax subject of the appeal.<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify; text-indent: 0.5in;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">e.<span style=""> </span>A decision of a division of the<span style=""> </span>Court of Tax Appeals adverse to the taxpayer or the government may be the subject of a motion for reconsideration or new trial, a denial of which is<span style=""> </span>appealable to the Court of Tax Appeals <i style="">en banc </i><span style=""> </span>by means of a petition for review. . <o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify; text-indent: 0.5in;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">f.<span style=""> </span>A decision of the Court of Tax Appeals <i style="">en banc </i><span style=""> </span>adverse to the taxpayer or the government may be appealed to the Supreme Court through a petition for review on certiorari filed with fifteen (15) days from notice, and extendible for justifiable reasons for thirty (30) days only.<span style=""> </span><o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><o:p> </o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span><b style="">8. The legal remedy under the NIRC of 1997 available to an aggrieved taxpayer at the <u>administrative level</u></b> with respect to refund or recovery of tax erroneously or illegally collected, is to file a claim for refund or credit with the Commissioner of Internal Revenue.<span style=""> </span>(1<sup>st</sup> par., Sec. 229, NIRC of 1997)<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><o:p> </o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span><b style="">9.<span style=""> </span>The legal remedy under the NIRC of 1997 at the judicial level with respect to <u>refund or recovery of tax</u> erroneously or illegally collected,</b> is the filing of a suit or proceeding with the Court of Tax Appeals<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify; text-indent: 0.5in;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">a.<span style=""> </span>before the expiration of two (2) years from the date of payment of the tax regardless of any supervening cause that may arise after payment<span style=""> </span>(2<sup>nd</sup> par., Sec. 229, NIRC of 1997;), or<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify; text-indent: 0.5in;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">b.<span style=""> </span>within thirty (30) days from receipt of the denial by the Commissioner of the application for refund or credit.<span style=""> </span>(Sec. 11, R.A. No. 1125)<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify; text-indent: 0.5in;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><o:p> </o:p></span></p> <p class="MsoNormal" style="text-align: justify; text-indent: 0.5in;"><b style=""><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">10.<span style=""> </span></span></b><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">The two (2) year period and the thirty (30) day period should be applied on a whichever comes first basis.<span style=""> </span>Thus, if the 30 days is within the 2 years, the 30 days applies, if the 2 year period is about to lapse but there is no decision yet by the Commissioner which would trigger the 30-day period, the taxpayer should file an appeal, despite the absence of a decision.<span style=""> </span><i style="">(Commissioners, etc.<span style=""> </span>v. Court of Tax Appeals, et al., G.R.No. 82618, </i></span><st1:date month="3" day="16" year="1989"><i style=""><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">March 16, 1989</span></i></st1:date><i style=""><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">, unrep.)<o:p></o:p></span></i></p> <p class="MsoNormal" style="text-align: justify; text-indent: 0.5in;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><o:p> </o:p></span></p> <p class="MsoNormal" style="text-align: justify; text-indent: 0.5in;"><b style=""><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">11.<span style=""> </span></span></b><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">Where the taxpayer is a corporation the two year prescriptive period from “date of payment” for refund of income taxes should be the date when the corporation filed its final adjustment return not on the date when the taxes were paid on a quarterly basis.<span style=""> </span><i style="">(Philippine Bank of Communications v. Commissioner of Internal Revenue, et al., G.R. No. 112024, January 28, 1999)<o:p></o:p></i></span></p> <p class="MsoNormal" style="text-align: justify; text-indent: 0.5in;"><i style=""><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><o:p> </o:p></span></i></p> <p class="MsoNormal" style="text-align: justify; text-indent: 0.5in;"><b style=""><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">12.<span style=""> </span></span></b><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">Generally speaking it is the Final Adjustment Return, in which amounts of the gross receipts and deductions have been audited and adjusted, which is reflective of the results of the operations of a business enterprise.<span style=""> </span>It is only when the return, covering the whole year, is filed that the taxpayer will be able to ascertain whether a tax is still due or refund can be claimed based on the adjusted and audited figures. <i style="">(Bank of the Philippine </i></span><st1:place><i style=""><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">Islands</span></i></st1:place><i style=""><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"> v. Commissioner of Internal Revenue, G.R. No. 144653, </span></i><st1:date month="8" day="28" year="2001"><i style=""><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">August 28, 2001</span></i></st1:date><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">)<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><i style=""><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><o:p> </o:p></span></i></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span><span style=""> </span><b style="">13.<span style=""> </span></b>Outline of tax remedies of a taxpayer and the government relative to ASSESSMENT<span style=""> </span>of internal revenue taxes<b style="">.<o:p></o:p></b></span></p> <p class="MsoNormal" style="text-align: justify; text-indent: 0.5in;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">a.<span style=""> </span>The taxpayer files his tax return.<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify; text-indent: 0.5in;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">b.<span style=""> </span>A Letter of Authority is issued authorizing BIR examiner to audit or examine the tax return and determines whether the full and complete taxes have been paid.<b style=""><span style=""> </span><o:p></o:p></b></span></p> <p class="MsoNormal" style="text-align: justify; text-indent: 0.5in;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">c.<span style=""> </span>If the examiner is satisfied that the tax return is truly reflective of the taxable transaction and all taxes have been paid, the process ends.<span style=""> </span>However, if the examiner is not satisfied that the tax return is truly reflective of the taxable transaction and that the taxes have not been fully paid, a Notice of Informal Conference is issued inviting the taxpayer to explain why he should not be subject to additional taxes.<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify; text-indent: 0.5in;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">d.<span style=""> </span>If the taxpayer attends the informal conference and the examiner is satisfied with the explanation of the taxpayer, the process is again ended.<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify; text-indent: 0.5in;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">If the taxpayer ignores the invitation to the informal conference, or if the examiner is not satisfied with taxpayer’s explanation,, and he believes that proper taxes should be assessed, the Commissioner of Internal Revenue or his duly authorized representative shall then notify the taxpayer of the findings in the form of a pre-assessment notice.<span style=""> </span>The pre-assessment notice requires the taxpayer to explain within fifteen (15) days from receipt why no notice of assessment and letter of demand for additional taxes should be directed to him.<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify; text-indent: 0.5in;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">e.<span style=""> </span>If the Commissioner is satisfied with the explanation of the taxpayer, then the process is again ended.<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify; text-indent: 0.5in;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">If the taxpayer ignores the pre-assessment notice by not responding or his explanations are not accepted by the Commissioner, then a notice of assessment and a letter of demand is issued.<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify; text-indent: 0.5in;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">The notice of assessment must be issued by the Commissioner to the taxpayer within a period of three (3) years from the time the tax return was filed or should have been filed whichever is the later of the two events.<span style=""> </span>Where the taxpayer did not file a tax return or where the tax return filed is false or fraudulent, then the Commissioner has a period of ten (10) years from discovery of the failure to file a tax return or from discovery of the fraud within which to issue an assessment notice.<span style=""> </span>The running of the above prescriptive periods may however be suspended under certain instances.<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify; text-indent: 0.5in;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">The notice of assessment must be issued within the prescriptive period and must contain the facts, law and jurisprudence relied upon by the Commissioner.<span style=""> </span>Otherwise it would not be valid.<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify; text-indent: 0.5in;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">f.<span style=""> </span>The taxpayer should then file an administrative protest by filing a request for reconsideration or reinvestigation within thirty (30) days from receipt of the assessment notice.<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify; text-indent: 0.5in;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">The taxpayer could not immediately interpose an appeal to the Court of Tax Appeals because there is no decision yet of the Commissioner that could be the subject of a review.<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify; text-indent: 0.5in;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">To be valid the administrative protest must be filed within the prescriptive period, must show the error of the Bureau of Internal Revenue and the correct computations supported by a statement of facts, and the law and jurisprudence relied upon by the taxpayer.<span style=""> </span>There is no need to pay under protest.<span style=""> </span>If the protest was not seasonably filed the assessment becomes final and collectible and the Bureau of Internal Revenue could use its administrative and judicial remedies in collecting the tax.<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify; text-indent: 0.5in;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">g.<span style=""> </span>Within sixty (60) days from filing of the protest, all relevant supporting documents shall be submitted, otherwise the assessment shall become final and collectible and the BIR could use its administrative and judicial remedies to collect the tax.<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify; text-indent: 0.5in;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">Once an assessment has become final and collectible, not even the BIR Commissioner could change the same.<span style=""> </span>Thus, the taxpayer could not pay the tax, then apply for a refund, and if denied appeal the same to the Court of Tax Appeals.<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify; text-indent: 0.5in;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">h.<span style=""> </span>If the protest is denied in whole or in part, or is not acted upon within one hundred eighty (180) days from the submission of documents, the taxpayer adversely affected by the decision or inaction may appeal to the Court of Tax Appeals within thirty (30) days from receipt of the adverse decision, or from the lapse of the one hundred eighty (180-) day period, with an application for the issuance of a writ of preliminary injunction to enjoin the BIR from collecting the tax subject of the appeal.<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify; text-indent: 0.5in;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>If the taxpayer fails to so appeal, the denial of the Commissioner or the inaction of the Commissioner would result to the notice of assessment becoming final and collectible and the BIR could then utilize its administrative and judicial remedies to collect the tax.<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify; text-indent: 0.5in;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">i.<span style=""> </span>A decision of a division of the<span style=""> </span>Court of Tax Appeals adverse to the taxpayer or the government may be the subject of a motion for reconsideration or new trial, a denial of which is<span style=""> </span>appealable to the Court of Tax Appeals <i style="">en banc </i><span style=""> </span>by means of a petition for review. . <o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify; text-indent: 0.5in;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">The Court of Tax Appeals, has a period of twelve (12) months from submission of the case for decision within which to decide.<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify; text-indent: 0.5in;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">j.<span style=""> </span>If the decision of the Court of Tax Appeals <i style="">en banc</i> affirms the denial of the protest by the Commissioner or the assessment in case of failure by the Commissioner to decide the taxpayer must file a petition for review on certiorari with the Supreme Court within fifteen (15) days from notice of the judgment on<span style=""> </span>questions of law.<span style=""> </span>An extension of thirty (30) days may for justifiable reasons be granted.<span style=""> </span>If the taxpayer does not so appeal, the decision of the Court of Tax Appeals would become final and this has the effect of making the assessment also final and collectible.<span style=""> </span>The BIR could then use its administrative and judicial remedies to collect the tax.<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify; text-indent: 0.5in;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><o:p> </o:p></span></p> <p class="MsoBodyText" style="margin-bottom: 0.0001pt; text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span><b style="">14.<span style=""> </span>The jurisdiction of the Court of Tax Appeals:<o:p></o:p></b></span></p> <p class="MsoBodyText" style="margin-bottom: 0.0001pt; text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>“a.<span style=""> </span><b style="">Exclusive appellate jurisdiction to review by appeal, as herein provided:<o:p></o:p></b></span></p> <p class="MsoBodyText" style="margin: 0in 0in 0.0001pt 0.3in; text-align: justify; text-indent: -0.3in;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>1.<span style=""> </span>Decisions of the Commissioner of Internal Revenue in cases involving disputed assessments, refunds of internal revenue taxes, fees or other charges, penalties, in relation thereto, or other matters arising under the National Internal Revenue Code or other laws administered by the Bureau of Internal Revenue’;<span style=""> </span>(DIVISION)<o:p></o:p></span></p> <p class="MsoBodyText" style="margin: 0in 0in 0.0001pt 0.3in; text-align: justify; text-indent: 21.9pt;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>2.<span style=""> </span>Inaction by the Commissioner of Internal Revenue in cases involving disputed assessments, refunds or internal revenue taxes, fees or other charges, penalties in relation thereto, or other matter arising under the National Internal Revenue Code or other laws administered by the Bureau of Internal Revenue, where the National Internal Revenue Code provides a specific period of action, in which case the inaction shall be deemed a denial;<span style=""> </span>(The inaction on refunds in two years from the time tax<span style=""> </span>was paid.<span style=""> </span>Thus, if the prescriptive period of two years is about to expire, the taxpayer should interpose a petition for review with the CTA – DIVISION)<o:p></o:p></span></p> <p class="MsoBodyText" style="margin: 0in 0in 0.0001pt 0.3in; text-align: justify; text-indent: -0.3in;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>3.<span style=""> </span>Decisions, orders or resolutions of the Regional Trial Courts in local tax cases originally decided or resolved by them in the exercise of their original or appellate jurisdiction;<span style=""> </span>(If original DIVISION; if appellate <i style="">EN BANC</i>)<o:p></o:p></span></p> <p class="MsoBodyText" style="margin: 0in 0in 0.0001pt 0.3in; text-align: justify; text-indent: 21.9pt;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>4.<span style=""> </span>Decisions of the Commissioner of Customs in cases involving liability for customs duties, fees or other money charges, seizure, detention or release of property affected, fines, forfeitures or other penalties in relation thereto, or other matters arising under the Customs Law or other laws administered by the Bureau of Customs;<span style=""> </span>(DIVISION)<o:p></o:p></span></p> <p class="MsoBodyText" style="margin: 0in 0in 0.0001pt 0.3in; text-align: justify; text-indent: 21.9pt;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>5.<span style=""> </span>Decisions of the Central Board of Assessment Appeals in the exercise of its appellate jurisdiction over cases involving the assessment and taxation of real property originally decided by the provincial or city board of assessment appeals;<span style=""> </span>(<i style="">EN BANC</i>)<o:p></o:p></span></p> <p class="MsoBodyText" style="margin: 0in 0in 0.0001pt 0.3in; text-align: justify; text-indent: 21.9pt;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>6.<span style=""> </span>Decisions of the Secretary of Finance on customs cases elevated to him automatically for review from decisions of the Commissioner of Customs which are adverse to the Government under Section 2315 of the Tariff and Customs Code;<span style=""> </span>(This has reference to forfeiture cases where the decision is to release the seized articles – DIVISION)<o:p></o:p></span></p> <p class="MsoBodyText" style="margin: 0in 0in 0.0001pt 0.3in; text-align: justify; text-indent: 21.9pt;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>7.<span style=""> </span>Decisions of the Secretary of Trade and Industry, in case of nonagricultural product, commodity or article, and the Secretary of Agriculture in the case of agricultural product, commodity or article, involving dumping and countervailing duties under Section 301 and 302, respectively, of the Tariff and Customs Code, and safeguard measures under Republic Act No. 8800, where either party may appeal the decision to impose or not to impose said duties.<span style=""> </span>(DIVISION)<o:p></o:p></span></p> <p class="MsoBodyText" style="margin-bottom: 0.0001pt; text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>b.<span style=""> </span><b style="">Jurisdiction over cases involving criminal offenses as herein provided:<o:p></o:p></b></span></p> <p class="MsoBodyText" style="margin: 0in 0in 0.0001pt 0.3in; text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>1.<span style=""> </span><b style="">Exclusive original jurisdiction over all criminal cases</b> arising from violations of the National Internal Revenue Code or Tariff and Customs Code and other laws administered by the Bureau of Internal Revenue or the Bureau of Customs: <i style="">Provided, however, </i>That offenses or felonies mentioned in this paragraph where the principal amount of taxes and fees, exclusive of charges and penalties claimed, is less than One million pesos (P1,000,000.00) or where there is no specified amount claimed shall be tried by the regular Courts and the jurisdiction of the CTA shall be appellate. Any provision of law or the Rules of Court to the contrary notwithstanding, the criminal action and the corresponding civil action for the recovery of civil liability for taxes and penalties shall at all times be simultaneously instituted with, and jointly determined in the same proceeding by the CTA, the filing of the criminal action being deemed to necessarily carry with it the filing of the civil action, and no right to reserve the filing of such civil action separately from the civil action will be recognized.<o:p></o:p></span></p> <p class="MsoBodyText" style="margin-bottom: 0.0001pt; text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>2.<span style=""> </span><b style="">Exclusive appellate jurisdiction in criminal offenses:<o:p></o:p></b></span></p> <p class="MsoBodyText" style="margin: 0in 0in 0.0001pt 0.8in; text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>a) <span style=""> </span>Over appeals from the judgments, resolutions or orders of the Regional Trial Courts in tax cases originally decided by them, in their respective territorial jurisdiction.<o:p></o:p></span></p> <p class="MsoBodyText" style="margin: 0in 0in 0.0001pt 0.8in; text-align: justify; text-indent: 6.9pt;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>b)<span style=""> </span>Over petitions for review of the judgments, resolutions or orders of the Regional Trial Courts in the exercise of their appellate jurisdiction over tax cases originally decided by the Metropolitan Trial Courts, Municipal Trial Courts and Municipal Circuit Trial Courts in their respective jurisdiction.<o:p></o:p></span></p> <p class="MsoBodyText" style="margin-bottom: 0.0001pt; text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>c.<span style=""> </span><b style="">Jurisdiction over tax collection cases:<o:p></o:p></b></span></p> <p class="MsoBodyText" style="margin: 0in 0in 0.0001pt 0.4in; text-align: justify; text-indent: -0.4in;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>1.<span style=""> </span>Exclusive original jurisdiction in tax<span style=""> </span>collection cases involving final and executory assessments for taxes, fees, charges and penalties: <i style="">Provided, however, </i>That collection cases where the principal amount of taxes and fees, exclusive of charges and penalties, claimed is less than One million pesos (P1,000,000) shall be tried by the proper Municipal Trial Court, Metropolitan Trial Court and Regional Trial Court.<o:p></o:p></span></p> <p class="MsoBodyText" style="margin: 0in 0in 0.0001pt 0.3in; text-align: justify; text-indent: 21.9pt;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>2.<span style=""> </span>Exclusive appellate jurisdiction in tax collection cases:<o:p></o:p></span></p> <p class="MsoBodyText" style="margin: 0in 0in 0.0001pt 0.8in; text-align: justify; text-indent: -0.8in;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>a.<span style=""> </span>Over appeals from judgments, resolutions, or orders of the Regional Trial Courts in tax collection cases originally decided by them, in their respective territorial jurisdiction.<o:p></o:p></span></p> <p class="MsoBodyText" style="margin: 0in 0in 0.0001pt 0.8in; text-align: justify; text-indent: -0.8in;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>b.<span style=""> </span>Over petitions for review of the judgments, resolutions or orders of the Regional Trial Courts in the exercise of their appellate jurisdiction over tax collection cases originally decided by the Metropolitan Trial Courts, Municipal Trial Courts and Municipal Circuit Trial Courts, in their respective jurisdiction.”<span style=""> </span>(Sec. 7, R. A. No. 1125, as amended by R. A. No. 9282, emphasis and words in parentheses supplied)<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span><o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><b style=""><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>15.<span style=""> </span>The following are the acts of BIR Commissioner considered as denial of a protest which serve as basis for appeal to the Court of Tax Appeals:<o:p></o:p></span></b></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>a.<span style=""> </span><span style=""> </span>Filing by the BIR of a civil suit for collection of the deficiency tax is considered a denial of the request for reconsideration.<span style=""> </span>(<i style="">Commissioner of Internal Revenue v. Union Shipping Corporation, </i>185 SCRA 547)<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>b.<span style=""> </span><span style=""> </span>An indication to the taxpayer by the Commissioner “in clear and unequivocal language” of his final denial not the issuance of the warrant of distraint and levy.<span style=""> </span>What is the subject of the appeal is the final decision not the warrant of distraint. <i style="">(Commissioner of Internal Revenue v. Union Shipping Corporation, </i>185 SCRA 547<i style="">)</i><o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span><span style=""> </span>c. <span style=""> </span>A BIR demand letter sent to the taxpayer after his protest of the assessment notice is considered as the final decision of the Commissioner on the protest.<span style=""> </span><i style="">(Surigao Electric Co., Inc. v. Court of Tax Appeals, et al., </i>57 SCRA 523)<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>d.<span style=""> </span>A letter of the BIR Commissioner reiterating to a taxpayer his previous demand to pay an assessment is considered a denial of the request for reconsideration or protest and is appealable to the Court of Tax Appeals.<span style=""> </span><i style="">(Commissioner v. Ayala Securities Corporation, </i>70 SCRA 204)<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>e.<span style=""> </span>Final notice before seizure considered as commissioner’s decision of taxpayer’s request for reconsideration who received no other response.<span style=""> </span><i style="">Commissioner of Internal Revenue v. Isabela Cultural Corporation</i>, G.R. No. 135210, July 11, 2001<i style=""> </i>held that not only is the Notice the only response received: its content and tenor supports the theory that it was the CIR’s final act regarding the request for reconsideration.<span style=""> </span>The very title expressly indicated that it was a <i style="">final </i>notice prior to seizure of property.<span style=""> </span>The letter itself clearly stated that the taxpayer was being given “this LAST OPPORTUNITY” to pay; otherwise, its properties would be subjected to distraint and levy.<span style=""> </span><o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><o:p> </o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><b style=""><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>16.<span style=""> </span><i style=""><span style=""> </span>The taxpayer seasonably protested the assessment issued by the Commissioner of Internal Revenue.<span style=""> </span>During the pendency of the protest the CIR issued a warrant of distraint and levy to collect the taxes subject of the protest. <o:p></o:p></i></span></b></p> <p class="MsoNormal" style="text-align: justify;"><b style=""><i style=""><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>As counsel what advice shall you give the taxpayer.<span style=""> </span>Explain briefly your answer.<o:p></o:p></span></i></b></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>ANSWER:<span style=""> </span>The taxpayer should appeal, by way of a petition for review,<span style=""> </span>to the Court of Tax Appeals not on the ground of the denial of the protest but on other matter arising under the provisions of the National Internal Revenue Code.<span style=""> </span>The actual issuance of a warrant of distraint and levy in certain cases<span style=""> </span>cannot be considered a final decision on a disputed assessment.<span style=""> </span><o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify; text-indent: 0.5in;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">To be a valid decision on a disputed assessment, the decision of the Commissioner or his duly authorized representative shall (a) state the facts, the applicable law, rules and regulations, or jurisprudence on which such decision is based, otherwise, the decision shall be void, in which case the same shall not be considered a decision on the disputed assessment; and (b) that the same is his final decision.<span style=""> </span>(Sec. 3.1.6, Rev. Regs. 12-99)<span style=""> </span>These conditions are not complied with by the mere issuance of a warrant of distraint and levy. <i style="">(Commissioner of Internal Revenue v. Union Shipping Corp., </i>185 SCRA 547<i style="">) </i><o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>Furthermore, a motion for the suspension of the collection of the tax may be filed together with the petition for review (Sec. 3, Rule 10, RRCTA effective December 15, 2005) because the collection of the tax may jeopardize the interest of the taxpayer.<span style=""> </span><o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><o:p> </o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span><b style="">17.<span style=""> </span>As a general rule, there must always be a decision of the Commissioner of Internal Revenue or Commissioner of Customs before the Court of Tax Appeals, would have jurisdiction. </b><span style=""> </span>If there is no such decision, the would be dismissed for lack of jurisdiction unless the case falls under any of the following exceptions. <o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span><b style=""><o:p></o:p></b></span></p> <p class="MsoNormal" style="text-align: justify;"><b style=""><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>18.</span></b><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span><b style="">Instances where the Court of Tax Appeals would have jurisdiction even if there is no decision yet by the Commissioner of Internal Revenue:<o:p></o:p></b></span></p> <p class="MsoNormal" style="text-align: justify; text-indent: 0.5in;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">a.<span style=""> </span>Where the Commissioner has not acted on the disputed assessment after a period of 180 days from submission of complete supporting documents, the taxpayer has a period of 30 days from the expiration of the 180 day period within which to appeal to the Court of Tax Appeals. (last par., Sec. 228 (e), NIRC of 1997<i style="">; Commissioner of Internal Revenue v. Isabela Cultural Corporation, G.R. No. 135210, July 11, 2001)<o:p></o:p></i></span></p> <p class="MsoNormal" style="text-align: justify; text-indent: 0.5in;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">b.<span style=""> </span>Where the Commissioner has not acted on an application for refund or credit and the two year period from the time of payment is about to expire, the taxpayer has to file his appeal with the Court of Tax Appeals before the expiration of two years from the time the tax was paid.<span style=""> </span><o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify; text-indent: 0.5in;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">It is disheartening enough to a taxpayer to be kept waiting for an indefinite period for the ruling,.<span style=""> </span>It would make matters more exasperating for the taxpayer if the doors of justice would be closed for such a relief until after the Commissioner, would have, at his personal convenience, given his go signal.<span style=""> </span><i style="">(Commissioner of Customs, et al, v. Court of Tax Appeals, et al., G.R. No. 82618, March 16, 1989, unrep.)<o:p></o:p></i></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><o:p> </o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span><b style="">19.<span style=""> </span>What is the<span style=""> </span>legal remedy under the NIRC of 1997 at the judicial level with respect to <u>refund or recovery of tax</u> erroneously or illegally collected ?<o:p></o:p></b></span></p> <p class="MsoNormal" style="text-align: justify;"><b style=""><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span></span></b><u><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US">SUGGESTED ANSWER.</span></u><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span>The legal remedy under the NIRC of 1997 at the judicial level with respect to <u>refund or recovery of tax</u> erroneously or illegally collected, is the filing of a suit or proceeding with the Court of Tax Appeals<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify; text-indent: 0.5in;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US">a.<span style=""> </span>before the expiration of two (2) years from the date of payment of the tax regardless of any supervening cause that may arise after payment<span style=""> </span>(2<sup>nd</sup> par., Sec. 229, NIRC of 1997), or<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify; text-indent: 0.5in;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US">b.<span style=""> </span>within thirty (30) days from receipt of the denial by the Commissioner of the application for refund or credit.<span style=""> </span>(Sec. 11, R.A. No. 1125)<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify; text-indent: 0.5in;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><o:p> </o:p></span></p> <p class="MsoNormal" style="text-align: justify; text-indent: 0.5in;"><b style=""><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US">20.<span style=""> </span></span></b><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US">The two (2) year period and the thirty (30) day period should be applied on a whichever comes first basis.<span style=""> </span>Thus, if the 30 days is within the 2 years, the 30 days applies, if the 2 year period is about to lapse but there is no decision yet by the Commissioner which would trigger the 30-day period, the taxpayer should file an appeal, despite the absence of a decision.<span style=""> </span><i style="">(Commissioners, etc.<span style=""> </span>v. Court of Tax Appeals, et al., G. R. No. 82618, March 16, 1989, unrep.)<o:p></o:p></i></span></p> <p class="MsoNormal" style="text-align: justify; text-indent: 0.5in;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><o:p> </o:p></span></p> <p class="MsoNormal" style="text-align: justify; text-indent: 0.5in;"><b style=""><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US">21.<span style=""> </span></span></b><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US">Where the taxpayer is a corporation the two year prescriptive period from “date of payment” for refund of income taxes should be the date when the corporation filed its final adjustment return not on the date when the taxes were paid on a quarterly basis.<span style=""> </span><i style="">(Philippine Bank of Communications v. Commissioner of Internal Revenue, et al., G.R. No. 112024, January 28, 1999)<o:p></o:p></i></span></p> <p class="MsoNormal" style="text-align: justify; text-indent: 0.5in;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US">Generally speaking it is the Final Adjustment Return, in which amounts of the gross receipts and deductions have been audited and adjusted, which is reflective of the results of the operations of a business enterprise.<span style=""> </span>It is only when the return, covering the whole year, is filed that the taxpayer will be able to ascertain whether a tax is still due or refund can be claimed based on the adjusted and audited figures. <i style="">(Bank of the Philippine Islands v. Commissioner of Internal Revenue, G.R. No. 144653, August 28, 2001</i>)<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><i style=""><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><o:p> </o:p></span></i></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span><span style=""> </span><b style="">22.<span style=""> </span>What is the burden of taxpayers seeking tax refunds or credits ?<o:p></o:p></b></span></p> <p class="MsoNormal" style="text-align: justify;"><b style=""><i style=""><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span></span></i></b><u><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US">SUGGESTED ANSWER:</span></u><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span>It has always been the rule that those seeking tax refunds or credits bear the burden of proving the factual basis of their claims and of showing, by words too plain to be mistaken, that the legislature intended to entitle them to such claims.<span style=""> </span>(<i style="">Atlas Consolidated Mining and Development Corporation v. Commissioner of Internal Revenue, </i>G. R. No. 145526, March 16, 2007, See <i style="">Commissioner of Internal Revenue v. Seagate Technology (Philippines) </i>G. R. No. 153866, 11 February 2005, 451 SCRA 132)<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><o:p> </o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span><b style="">23.<span style=""> </span>What is the nature of proceedings before the Court of Tax Appeals ?<o:p></o:p></b></span></p> <p class="MsoNormal" style="text-align: justify;"><b style=""><i style=""><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span></span></i></b><u><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US">SUGGESTED ANSWER:</span></u><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span><o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span>First, a judicial claim for refund or tax credit in the CTA is by no means an original action, but rather an appeal by way of petition for review of a previous, unsuccessful administrative claim.<span style=""> </span><o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span>Therefore, as in every appeal or petition for review, a petitioner has to convince the appellate court that the quasi-judicial agency a <i style="">quo</i> did not have any reason to deny its claims.<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span>Second, cases filed in the CTA are litigated <i style="">de novo</i>.<span style=""> </span>Thus, a petitioner should prove every minute aspect of its case by presenting, formally offering and submitting its evidence to the CTA.<span style=""> </span><o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span>Since it is crucial for a petitioner in a judicial claim for refund or tax credit to show that its administrative claim should have been granted in the first place, part of the evidence to be submitted to the CTA must necessarily include whatever is required for the successful prosecution of an administrative claim.<span style=""> </span>(<i style="">Atlas Consolidated Mining and Development Corporation v. Commissioner of Internal Revenue, </i>G. R. No. 145526, March 116, 2007)<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><o:p> </o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span><b style="">24.<span style=""> </span>Applicability of <i style="">Proton Pilipinas Corporation vs. Republic, etc., </i>G. R. No. 165027, October 16, 2006.<i style=""><span style=""> </span></i></b>The case was decided on factual antecedents before R. A. No. 9282 which grants criminal jurisdiction to the Court of Tax Appeals if the value of the tax is P1 million or more.<b style=""><i style=""><o:p></o:p></i></b></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span>Interpreting the provisions of<span style=""> </span>Republic Act No. 8249, which provides that the civil action for recovery of civil liability should be jointly determined in the criminal proceeding by the Sandiganbayan or appropriate courts, the prohibition of reservation of the criminal aspect, the Supreme Court said that tax collection cases may be tried separately, and not before the Sandiganbayan in Rep. Act No. 3019 cases.<span style=""> </span>This is so because, Rep. Act No. 3019 is silent on the definition of civil liability and the application of Art. 104 of the Revised Penal Code does not cover taxes.<span style=""> </span>Consequently, the Supreme Court ruled that on the tax collection case the RTC would have jurisdiction.<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span><b style="">Interpretation by the author in the light of Rep. Act. 9282.</b> If it is a criminal case cognizable by the Sandiganbayan, then this court retains jurisdiction,<span style=""> </span>with the civil jurisdiction being cognizable by the CTA or the lower courts depending on the amount.<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span>If the issue is a purely tax case, even if it involves cases cognizable by the Sandiganbayan, then jurisdiction vests upon the CTA or the lower courts depending on the amount of the tax.<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><o:p> </o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><b style=""><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span>25. <span style=""> </span></span></b><b style=""><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">On January 24, 1995, the then Secretary of Finance, through the recommendation of the then Commissioner of Internal Revenue issued Revenue Regulations [Rev. Reg.] No. 1-95, providing the “Rules and Regulations to Implement the Tax Incentives Provisions Under Paragraphs (b) and (c) of Section 12, [R.A.] No. 7227, [o]therwise known as the Bases Conversion and Development Act of 1992.”<span style=""> </span>Subsequently, Rev. Reg. No. 12-97 was issued providing for the “Regulations Implementing Sections 12(c) and 15 of [R.A.] No. 7227 and Sections 24(b) and (c) of [R.A.] No. 7916 Allocating Two Percent (2%) of the Gross Income Earned by All Businesses and Enterprises Within the Subic, Clark, John Hay, Poro Point Special</span></b><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"> <b style="">Economic Zones and other Special Economic Zones under PEZA.”<span style=""> </span>O</b>n <b style="">September 27, 1999, Rev. Reg. No. 16-99 was issued “Amending [RR] No. 1-95, as amended, and other related Rules and Regulations to Implement the Provisions of paragraphs (b) and (c) of Section 12 of [R.A.] No. 7227, otherwise known as the ‘Bases Conversion and Development Act of 1992’ Relative to the Tax Incentives Granted to Enterprises Registered in the Subic Special Economic and Freeport Zone.”<o:p></o:p></b></span></p> <p class="MsoNormal" style="text-align: justify; text-indent: 0.5in;"><b style=""><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">On June 3, 2003, the Commissioner of Internal Revenue issued Revenue Memorandum Circular (RMC) No. 31-2003 setting the “Uniform Guidelines on the Taxation of Imported Motor Vehicles through the Subic Free Port Zone and Other Freeport Zones that are Sold at Public Auction,”<span style=""> </span>which provided for the tax treatments on the transactions involved in the importation of motor vehicles through the SSEFZ and other legislated Freeport zones and subsequent sale thereof through public auction. This was later amended by RMC No. 32-2003.</span></b><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify; text-indent: 0.5in;"><b style=""><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">Asia International Auctioneers and others filed a complaint before the RTC of Olongapo City, to declare Void, Ultra Vires, and Unconstitutional [RMC] No. 31-2003 dated June 3, 2003 and [RMC] No. 32-2003 dated June 5, 2003</span></b><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">, <b style="">Rev. Reg. Nos. 1-95, 12-97 and 16-99 dated January 24, 1995,<span style=""> </span>August 7, 1997 and September 27, 1999, respectively</b>, <b style=""><o:p></o:p></b></span></p> <p class="MsoNormal" style="text-align: justify; text-indent: 0.5in;"><b style=""><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">They contended that jurisdiction over the case at bar properly pertains to the regular courts as this is “an action to declare as unconstitutional, void and against the provisions of [R.A. No.] 7227” the RMCs issued by the CIR.<span style=""> </span>They do<span style=""> </span>“do not challenge the rate, structure or figures of the imposed taxes, rather they challenge the authority of the respondent Commissioner to impose and collect the said taxes.” They also claim that the challenge on the authority of the CIR to issue the RMCs does not fall within the jurisdiction of the Court of Tax Appeals (CTA).<span style=""> </span><o:p></o:p></span></b></p> <p class="MsoNormal" style="text-align: justify; text-indent: 0.5in;"><b style=""><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">Does the RTC have jurisdiction ?<o:p></o:p></span></b></p> <p class="MsoNormal" style="text-align: justify; text-indent: 0.5in;"><u><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">SUGGESTED ANSWER:</span></u><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>No.<span style=""> </span>It is the Court of Tax Appeals that has exclusive jurisdiction.<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify; text-indent: 0.5in;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">In the case at bar, the assailed revenue regulations and revenue memorandum circulars are actually rulings or opinions of the CIR on the tax treatment of motor vehicles sold at public auction within the SSEZ to implement Section 12 of R.A. No. 7227 which provides that “<span style="">exportation or removal of goods from the territory of the [SSEZ]<span style=""> </span>to the other parts of the Philippine territory shall be subject to customs duties and taxes under the Customs and Tariff Code and other relevant tax laws of the Philippines.”</span><span style=""> </span>They were issued pursuant to the power of the CIR under Section 4 of the National Internal Revenue Code,<i style=""> viz</i>:<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify; text-indent: 0.5in;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">Section 4.<span style=""> </span>Power of the Commissioner to Interpret Tax Laws and to Decide Tax Cases.--<span style=""> </span>The power to interpret the provisions of this Code and other tax laws shall be under the exclusive and original jurisdiction of the Commissioner, subject to review by the Secretary of Finance.<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>The power to decide disputed assessments, refunds of internal revenue taxes, fees or other charges, penalties imposed in relation thereto, or other matters arising under this Code or other laws or portions thereof administered by the Bureau of Internal Revenue is vested in the Commissioner, subject to the exclusive appellate jurisdiction of the Court of Tax Appeals. (as amended by the NIRC of 1997, <i style="">emphases supplied, <span style="letter-spacing: -0.1pt;">Asia International Auctioneers, Inc., etc et al., .v. Parayno, Jr., etc.,, et al., </span></i><span style="letter-spacing: -0.1pt;">G. R. No. 103445, December 18, 2007)<o:p></o:p></span></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><o:p> </o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span><b style="">26.<span style=""> </span>What is the characteristic of a BIR denial of a protest such as would enable the taxpayer to appeal the same to the Court of Tax Appeals ?<i style=""><o:p></o:p></i></b></span></p> <p class="MsoNormal" style="text-align: justify;"><b style=""><i style=""><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span></span></i></b><u><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US">SUGGESTED ANSWER:</span></u><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span>The Commissioner of Internal Revenue should always indicate to the taxpayer in clear and unequivocal language whenever his action on an assessment questioned by a taxpayer constitutes his final determination on the disputed assessment.<span style=""> </span><o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span>On the basis of his statement indubitably showing that the Commissioner’s communicated action is his final decision on the contested assessment, the aggrieved taxpayer would then be able to take recourse to the tax court at the opportune time.<span style=""> </span>Without needless difficulty, the taxpayer would be able to determine when his right to appeal to the tax court accrues.<span style=""> </span>(<i style="">Commissioner of Internal Revenue v. Bank of the Philippines Islands, </i>G. R. No. 134062, April 17, 2007 citing <i style="">Oceanic Wireless Network, Inc. v. Commissioner of Internal Revenue, </i>G. R. No. 148380, 9 December 2005, 477 SCRA 205, 211-212, citing <i style="">Surigao Electric Co., Inc. v. Court of Tax Appeals, </i>G. R. No. L-254289, 28 June 1974, 57 SCRA 523)<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span><u><o:p></o:p></u></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span><b style="">27. Reasons for the rule requiring CIR’s unequivocal language on his action on the protest.<o:p></o:p></b></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span>a.<span style=""> </span>It would obviate all desire and opportunity on the part of the taxpayer to continually delay the finality of the assessment – and, consequently, the collection of the amount demanded as taxes – by repeated requests for recomputation and reconsideration.<b style=""><o:p></o:p></b></span></p> <p class="MsoNormal" style="text-align: justify;"><b style=""><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span></span></b><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US">b.<b style=""><span style=""> </span></b>On the part of the Commissioner of Internal Revenue, this would encourage his office to conduct a careful and thorough study of every questioned assessment and render a correct and define decision thereon in the first instance.<b style=""><o:p></o:p></b></span></p> <p class="MsoNormal" style="text-align: justify;"><b style=""><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span></span></b><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US">c.<span style=""> </span>This would also deter the Commissioner of Internal Revenue from unfairly making the taxpayer grope in the dark and speculate as to which action constitutes the decision appealable to the tax court.<b style=""><o:p></o:p></b></span></p> <p class="MsoNormal" style="text-align: justify;"><b style=""><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span></span></b><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US">d.<span style=""> </span>Of greater import, this rule of conduct would meet a pressing need for fair play, regularity, and orderliness in administrative action.<span style=""> </span>(<i style="">Commissioner of Internal Revenue v. Bank of the Philippines Islands, </i>G. R. No. 134062, April 17, 2007 citing <i style="">Oceanic Wireless Network, Inc. v. Commissioner of Internal Revenue, </i>G. R. No. 148380, 9 December 2005, 477 SCRA 205, 211-212, citing <i style="">Surigao Electric Co., Inc. v. Court of Tax Appeals, </i>G. R. No. L-254289, 28 June 1974, 57 SCRA 523)<b style=""><o:p></o:p></b></span></p> <p class="MsoNormal" style="margin-left: 0.4in; text-align: justify; text-indent: -0.4in;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><o:p> </o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><b style=""><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span>28.<span style=""> </span>Cite acts of BIR Commissioner that may be considered as denial of a protest which serve as basis for appeal to the Court of Tax Appeals.<o:p></o:p></span></b></p> <p class="MsoNormal" style="text-align: justify;"><b style=""><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span></span></b><u><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US">SUGGESTED ANSWER:<o:p></o:p></span></u></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span>a.<span style=""> </span><span style=""> </span>Filing by the BIR of a civil suit for collection of the deficiency tax is considered a denial of the request for reconsideration.<span style=""> </span>(<i style="">Commissioner of Internal Revenue v. Union Shipping Corporation, </i>185 SCRA 547)<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span>b.<span style=""> </span><span style=""> </span>An indication to the taxpayer by the Commissioner “in clear and unequivocal language” of his final denial not the issuance of the warrant of distraint and levy.<span style=""> </span>What is the subject of the appeal is the final decision not the warrant of distraint. <i style="">(Commissioner of Internal Revenue v. Union Shipping Corporation, </i>185 SCRA 547<i style="">)</i><o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span><span style=""> </span>c. <span style=""> </span>A BIR demand letter sent to the taxpayer after his protest of the assessment notice is considered as the final decision of the Commissioner on the protest.<span style=""> </span><i style="">(Surigao Electric Co., Inc. v. Court of Tax Appeals, et al., </i>57 SCRA 523)<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span>d.<span style=""> </span>A letter of the BIR Commissioner reiterating to a taxpayer his previous demand to pay an assessment is considered a denial of the request for reconsideration or protest and is appealable to the Court of Tax Appeals.<span style=""> </span><i style="">(Commissioner v. Ayala Securities Corporation, </i>70 SCRA 204)<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span>e.<span style=""> </span>Final notice before seizure considered as commissioner’s decision of taxpayer’s request for reconsideration who received no other response.<span style=""> </span><i style="">Commissioner of Internal Revenue v. Isabela Cultural Corporation</i>, G.R. No. 135210, July 11, 2001<i style=""> </i>held that not only is the Notice the only response received: its content and tenor supports the theory that it was the CIR’s final act regarding the request for reconsideration.<span style=""> </span>The very title expressly indicated that it was a <i style="">final </i>notice prior to seizure of property.<span style=""> </span>The letter itself clearly stated that the taxpayer was being given “this LAST OPPORTUNITY” to pay; otherwise, its properties would be subjected to distraint and levy.<span style=""> </span><o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><o:p> </o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><b style=""><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span>29.<span style=""> </span><i style=""><span style=""> </span></i>The taxpayer seasonably protested the assessment issued by the Commissioner of Internal Revenue.<span style=""> </span>During the pendency of the protest the CIR issued a warrant of distraint and levy to collect the taxes subject of the protest. <o:p></o:p></span></b></p> <p class="MsoNormal" style="text-align: justify;"><b style=""><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span>As counsel what advice shall you give the taxpayer.<span style=""> </span>Explain briefly your answer.<o:p></o:p></span></b></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span><u>SUGGESTED ANSWER</u>:<span style=""> </span>The taxpayer should appeal, by way of a petition for review,<span style=""> </span>to the Court of Tax Appeals not on the ground of the denial of the protest but on other matter arising under the provisions of the National Internal Revenue Code.<span style=""> </span>The actual issuance of a warrant of distraint and levy in certain cases<span style=""> </span>cannot be considered a final decision on a disputed assessment.<span style=""> </span><o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify; text-indent: 0.5in;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US">To be a valid decision on a disputed assessment, the decision of the Commissioner or his duly authorized representative shall (a) state the facts, the applicable law, rules and regulations, or jurisprudence on which such decision is based, otherwise, the decision shall be void, in which case the same shall not be considered a decision on the disputed assessment; and (b) that the same is his final decision.<span style=""> </span>(Sec. 3.1.6, Rev. Regs. 12-99)<span style=""> </span>These conditions are not complied with by the mere issuance of a warrant of distraint and levy. <i style="">(Commissioner of Internal Revenue v. Union Shipping Corp., </i>185 SCRA 547<i style="">) </i><o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span>Furthermore, a motion for the suspension of the collection of the tax may be filed together with the petition for review (Sec. 3, Rule 10, RRCTA effective December 15, 2005) because the collection of the tax may jeopardize the interest of the taxpayer.<span style=""> </span><o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><o:p> </o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><b style=""><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span>30.</span></b><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span><span style=""> </span><b style="">Instances where the Court of Tax Appeals would have jurisdiction even if there is no decision yet by the Commissioner of Internal Revenue:<o:p></o:p></b></span></p> <p class="MsoNormal" style="text-align: justify; text-indent: 0.5in;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US">a.<span style=""> </span>Where the Commissioner has not acted on the disputed assessment after a period of 180 days from submission of complete supporting documents, the taxpayer has a period of 30 days from the expiration of the 180 day period within which to appeal to the Court of Tax Appeals. (last par., Sec. 228 (e), NIRC of 1997<i style="">; Commissioner of Internal Revenue v. Isabela Cultural Corporation, G.R. No. 135210, July 11, 2001)<o:p></o:p></i></span></p> <p class="MsoNormal" style="text-align: justify; text-indent: 0.5in;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US">b.<span style=""> </span>Where the Commissioner has not acted on an application for refund or credit and the two year period from the time of payment is about to expire, the taxpayer has to file his appeal with the Court of Tax Appeals before the expiration of two years from the time the tax was paid.<span style=""> </span><o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify; text-indent: 0.5in;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US">It is disheartening enough to a taxpayer to be kept waiting for an indefinite period for the ruling,.<span style=""> </span>It would make matters more exasperating for the taxpayer if the doors of justice would be closed for such a relief until after the Commissioner, would have, at his personal convenience, given his go signal.<span style=""> </span><i style="">(Commissioner of Customs, et al, v. Court of Tax Appeals, et al., G.R. No. 82618, March 16, 1989, unrep.)<o:p></o:p></i></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><o:p> </o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span><span style=""> </span><b style="">31.<span style=""> </span>As a general rule, “No court shall have the authority to grant an injunction to restrain the collection of any national internal revenue tax, fee or charge</b>.”<span style=""> </span>(Sec. 218,<span style=""> </span>NIRC)<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span>“No appeal taken to the CTA from the decision of the Commissioner of Internal Revenue or the Commissioner of Customs or the Regional Trial Court, provincial, city or municipal treasurer or the Secretary of Finance, the Secretary of Trade and Industry and Secretary of Agriculture, as the case may be shall suspend the payment, levy, distraint, and/or sale of any property of the taxpayer for the satisfaction of his tax liability as provided by existing law: Provided, however, That when in the opinion of the Court the collection by the aforementioned government agencies may jeopardize the interest of the Government and/or the taxpayer the Court at any stage of the proceeding may suspend the said<span style=""> </span>collection and require the taxpayer either to deposit the amount claimed or to file a surety bond for not more than double the amount with the Court.”<span style=""> </span>(Sec. 11, Rep. Act No. 1125, as amended by Sec.9, Rep. Act No. 9282 )<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span>The Supreme Court may enjoin the collection of taxes under its general judicial power but it should be apparent that the source of the power is not statutory but constitutional.<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span>The Supreme Court did not grant the provisional remedy prayed for in <i style="">Southern Cross Cement Corporation v. The Philippine Cement Manufacturers Corp., et al., </i>G. R. No. 158540, July 8, 2004 for it would be tantamount to enjoining the collection of taxes, a peremptory judicial act which is traditionally frowned upon unless there is a clear statutory basis for it.<span style=""> </span>Evident is the clear legislative intent that the imposition of safeguard measures, despite the availability of judicial review, should not be enjoined notwithstanding any timely appeal of the imposition.<span style=""> </span>This so because the Safeguard Measures Act states that the filing of a petition for review before the CTA does not stop, suspend, or otherwise toll the imposition or collection of the appropriate tariff duties or the adoption of other appropriate safeguard measures.<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><o:p> </o:p></span></p> <p class="MsoBodyText" style="margin-bottom: 0.0001pt; text-align: justify; text-indent: 0.3in;"><b style=""><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span>32.<span style=""> </span>General rule:</span></b><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span>“The rule is that in the absence of accounting records of a taxpayer, his tax liability may be determined by estimation.<span style=""> </span>The petitioner (Commissioner of Internal Revenue)<span style=""> </span>is not required to compute such tax liabilities with mathematical exactness.<span style=""> </span>Approximation in the calculation of taxes due is justified.<span style=""> </span>To hold otherwise would be tantamount to holding that skillful concealment is an invincible barrier to proof.” [<i style="">Commissioner of Internal Revenue v. Hantex Trading Co., Inc. </i>G. R. No. 136975, March 31, 2005 citing <i style="">United States v. Johnson, </i>319 U.S. 1233 (1943)]<span style=""> </span>“However, the rule does not apply where the estimation is arrived at arbitrarily and capriciously.”<span style=""> </span>[<i style="">Commissioner of Internal Revenue v. Hantex Trading Co., Inc., </i>citing <i style="">United States v. Rindskopf, </i>105 U.S.418 (1881)]<o:p></o:p></span></p> <p class="MsoBodyText" style="margin-bottom: 0.0001pt; text-align: justify; text-indent: 0.3in;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><o:p> </o:p></span></p> <p class="MsoBodyText" style="margin-bottom: 0.0001pt; text-align: justify; text-indent: 0.3in;"><b style=""><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span>33.</span></b><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span><b style="">Meaning of "best evidence obtainable</b>" under<span style=""> </span>Sec. 6 (B), NIRC of 1997.<span style=""> </span>This<span style=""> </span>means<span style=""> </span>that<span style=""> </span>the<span style=""> </span>original<span style=""> </span>documents<span style=""> </span>must<span style=""> </span>be produced.<span style=""> </span>If it could not be produced, secondary evidence must be adduced.<span style=""> </span>(<i style="">Hantex Trading Co., Inc. v. Commissioner of Internal Revenue</i>, CA - G.R. SP No. 47172, September 30, 1998)<o:p></o:p></span></p> <p class="MsoBodyText" style="text-align: justify;"><b style=""><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><o:p> </o:p></span></b></p> <p class="MsoBodyText" style="text-align: justify;"><b style=""><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span>34.<span style=""> </span>Sec. 6 (B) of the NIRC of 1997 allows the BIR to make or amend a tax return from his own knowledge or obtained through testimony or otherwise</span></b><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US">.<span style=""> </span>Thus, the Commissioner of Internal Revenue investigates ”any circumstance which led him to believe that the taxpayer had taxable income larger than that reported. Necessarily, this inquiry would have to be outside of the books because they supported the return as filed.<span style=""> </span>He may take the sworn testimony of the taxpayer, he may take the testimony of third parties; he may examine and subpoena, if necessary, traders’ and brokers’ accounts and books and the taxpayer’s books of accounts.<span style=""> </span>The Commissioner is not bound to follow any set of patterns.<span style=""> </span>The existence of unreported income may be shown by any particular proof that is available in the circumstances of the particular situation.<span style=""> </span>[<i style="">Commissioner of Internal Revenue v. Hantex Trading Co., Inc. </i>citing <i style="">Campbell, Jr., v. Guetersloh, </i>287 F.2d 878 (1961)]<o:p></o:p></span></p> <p class="MsoBodyText" style="margin-bottom: 0.0001pt; text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span>Citing its ruling in a previous case, a “U.S. appellate court declared that where the records of the taxpayer are manifestly inaccurate and incomplete, the Commissioner may look to other sources of information to establish income made by the taxpayer during the years in question. (<i style="">Ibid., </i>in turn citing <i style="">Kenney v. Commissioner, </i>111 F.2d 374)<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><o:p> </o:p></span></p> <p class="MsoNormal" style="text-align: justify; text-indent: 0.3in;"><b style=""><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">35.<span style=""> </span></span></b><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">The following are the <b style="">general methods developed by the Bureau of Internal Revenue for reconstructing a taxpayer’s income</b> where the records do not show the true income or where no return was filed or what was filed was a false and fraudulent return<span style=""> </span><o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify; text-indent: 0.5in;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">(a)<span style=""> </span>Percentage method;<span style=""> </span><o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify; text-indent: 0.5in;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">(b)<span style=""> </span>Net worth method.; <o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify; text-indent: 0.5in;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">(c)<span style=""> </span>Bank deposit method;<span style=""> </span><o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify; text-indent: 0.5in;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">(d)<span style=""> </span>Cash expenditure method;<span style=""> </span><o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify; text-indent: 0.5in;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">(e)<span style=""> </span>Unit and value method;<span style=""> </span><o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify; text-indent: 0.5in;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">(f) Third party information or access to records method;<span style=""> </span><o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify; text-indent: 0.5in;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">(g)<span style=""> </span>Surveillance and assessment method.<span style=""> </span>(Chapter XIII. Indirect Approach to Investigation, Handbook on Audit Procedures and Techniques – Volume I, pp. 68-74)<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><o:p> </o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span><b style="">36.<span style=""> </span></b>Under the percentage method, the computed amount of revenues based on the percentage computation is compared to the amount of revenues reflected on the return.<span style=""> </span>The percentages used may be obtained from the taxpayer, industry publication, prior year’s audit results, or third parties.<span style=""> </span>The comparison will provide an indication on the possibility of revenue being understated.<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify; text-indent: 0.5in;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">Among the significant ratios and trends to be analyzed are the percentage mark-up, gross profits ratio or gross margin percentage, profit margin, total assets turnover, and inventory turnover. (Chapter XIII. Indirect Approach to Investigation, Handbook on Audit Procedures and Techniques – Volume I, pp. 68-74)<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><o:p> </o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><b style=""><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>37.<span style=""> </span></span></b><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">The net worth method<u> </u>is a method of reconstructing income which is based on the theory that if the taxpayer’s net worth has increased in a given year in an amount larger than his reported income, he has understated his income for that year.<span style=""> </span>The net worth on a fixed starting date is<span style=""> </span>compared with the net worth on a fixed ending date.<span style=""> </span>Any increase in net worth is presumed to be income not declared for tax purposes. (Chapter XIII. Indirect Approach to Investigation, Handbook on Audit Procedures and Techniques – Volume I, pp. 68-74)<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><o:p> </o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><b style=""><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>38.<span style=""> </span></span></b><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">The difficulty of establishing the opening net worth of a tax payer has led to the<span style=""> </span>“Cohan Rule” which is the use of estimates or approximations of the amount of cash and other asserts where the taxpayer lacks adequate records. (Chapter XIII. Indirect Approach to Investigation, Handbook on Audit Procedures and Techniques – Volume I, pp. 68-74)<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><o:p> </o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><b style=""><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>39.<span style=""> </span></span></b><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">Under the bank deposit method,<span style=""> </span>the bank records of the taxpayer are analyzed and the BIR estimates income on the basis of the total bank deposits after eliminating non-income items.<span style=""> </span>This method stands on the premise that deposits represent taxable income unless otherwise explained as being non-taxable items. This method may be used only where the BIR has been legally<span style=""> </span>allowed access to the taxpayer’s bank records. (Chapter XIII. Indirect Approach to Investigation, Handbook on Audit Procedures and Techniques – Volume I, pp. 68-74)<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><b style=""><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><o:p> </o:p></span></b></p> <p class="MsoNormal" style="text-align: justify;"><b style=""><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>40.<span style=""> </span></span></b><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">The cash expenditure method assumes that the excess of a taxpayer’s expenditures during the tax period over his reported income for that period is taxable to the extent not disproved otherwise. (Chapter XIII. Indirect Approach to Investigation, Handbook on Audit Procedures and Techniques – Volume I, pp. 68-74)<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span><o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><b style=""><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>41.<span style=""> </span></span></b><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">Under the unit and value method, <u>t</u>he determination or verification of gross receipts may be computed by applying price and profit figures to the known ascertainable quality of business of the taxpayer. (Chapter XIII. Indirect Approach to Investigation, Handbook on Audit Procedures and Techniques – Volume I, pp. 68-74)<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span><span style=""> </span>For example, in order to determine the gross receipts of a pizza parlor, multiply the pounds of flour used by the number of pizzas per pound which in turn would then be multiplied by the average price per pizza.<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><o:p> </o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><b style=""><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>42.<span style=""> </span></span></b><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">Third party information or access to records method.<span style=""> </span>The BIR may require third parties, public or private to supply information to the BIR, and thus, “obtain on a regular basis from any person other than the person whose internal revenue tax liability is subject to audit or investigation, or from any office or officer of the national and local governments, government agencies and instrumentalities including the Bangko Sentral ng Pilipinas and government-owned or –controlled corporations, any information such as, but not limited to, costs and volume of<span style=""> </span>production, receipts or sales and gross incomes of taxpayers, and the names , addresses, and financial statements of corporations, mutual fund companies, insurance companies, regional operating headquarters or multinational companies, joint accounts, associations, joint ventures or consortia and registered partnerships, and their members; xxx”<span style=""> </span>[Sec. 5 (B), NIRC of 1997)<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><o:p> </o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span><b style="">43.<span style=""> </span><span style=""> </span></b>A pre-assessment notice is a<span style=""> </span>letter sent by the Bureau of Internal Revenue to a taxpayer asking him to explain within a period of fifteen (15) days from receipt why he should not be the subject of an assessment notice.<span style=""> </span>It is part of the due process rights of a taxpayer.<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>As a general rule, the BIR could not issue an assessment notice without first issuing a pre-assessment notice because it is part of the due process rights of a taxpayer to be given notice in the form of a pre-assessment notice, and for him to explain why he should not be the subject of an assessment notice.<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><o:p> </o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span><span style=""> </span><b style="">44</b>.<span style=""> </span>Instances where a pre-assessment notice is not required before a notice of assessment is sent to the taxpayer.<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>a.<span style=""> </span>When the finding for any deficiency tax is the result of mathematical error in the computation of the tax as appearing on the face of the return; or<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>b.<span style=""> </span>When a discrepancy has been determined between the tax withheld and the amount actually remitted by the withholding agent; or<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>c.<span style=""> </span>When a taxpayer opted to claim a refund or tax credit of excess creditable withholding tax for a taxable period was determined to have carried over and automatically applied the same amount claimed against the estimated tax liabilities for the taxable quarter or quarters of the succeeding table year; or<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>d.<span style=""> </span>When the excess tax due on excisable articles has not been paid; or<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>e.<span style=""> </span>When an article locally purchased or imported by an exempt person, such as, but not limited to vehicles, capital equipment, machineries and spare parts, has been sold, trade or transferred to non-exempt persons.<span style=""> </span>(Sec. 228, NIRC of 1997)<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><o:p> </o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><o:p> </o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span><b style="">45.<span style=""> </span><span style=""> </span></b>The word assessment when used in connection with taxation, may have more than one meaning<b style="">.<span style=""> </span>More commonly the word “assessment” means the official valuation of a taxpayer’s property for purpose of taxation. The above definition of assessment finds application under<span style=""> </span>tariff and customs taxation as well as local government taxation</b>.<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span>For <b style="">real property taxation, there may be a special meaning to the burdens that are imposed upon real properties that have been benefited by a public works expenditure of a local government.</b><span style=""> </span>It is sometimes called a special assessment or a special levy. <i style="">(Commissioner of Internal Revenue v. Pascor Realty and Development Corporation, et al., </i>G.R. No. 128315, June 29, 1999)<b style=""><o:p></o:p></b></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span><b style="">For internal revenue taxation assessment as laying a tax. </b>The ultimate purpose of an assessment to such a connection is to ascertain the amount that each taxpayer is to pay. <i style="">(Commissioner of Internal Revenue v. Pascor Realty and Development Corporation, et al., </i>G.R. No. 128315, June 29, 1999)<b style=""><o:p></o:p></b></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><o:p> </o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span><b style="">46.<span style=""> </span>An assessment is a notice duly sent to the taxpayer which is deemed made only when the BIR releases, mails or sends such notice to the taxpayer.</b> <i style="">(Commissioner of Internal Revenue v. Pascor Realty and Development Corporation, et al., </i>G.R. No. 128315, June 29, 1999) <b style=""><o:p></o:p></b></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><o:p> </o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span><b style="">47.<span style=""> </span>What is a self-assessed tax ?<i style=""><o:p></o:p></i></b></span></p> <p class="MsoNormal" style="text-align: justify;"><b style=""><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span></span></b><u><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US">SUGGESTED ANSWER</span></u><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US">:<span style=""> </span>A tax that the taxpayer himself assesses or computes and pays to the taxing authority.<b style=""><span style=""> </span></b>It is a tax that self-assessed by the taxpayer without the intervention of an assessment by the tax authority to create the tax liability.<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span>The Tax Code follows the pay-as-you-file system of taxation under which the taxpayer computes his own tax liability, prepares the return, and pays the tax as he files the return.<span style=""> </span>The pay-as-you-file system is a self-assessing tax return.<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span>Internal revenue taxes are self-assessing.<span style=""> </span>[Dissent of J. Carpio in <i style="">Philippine National Oil Company v. Court of Appeals, et al., </i>G. R. No. 109976, April 26, 2005 and companion case citing <i style="">Tupaz v. Ulep, </i>316 SCRA 118 (1999) in turn citing Vitug and Acosta, <i style="">Tax Law and Jurisprudence, </i>1<sup>st</sup> edition, 1997, p. 267]<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span>A clear example of a self-assessed tax is the annual income tax, which the taxpayer himself computes and pays without the intervention of any assessment by the BIR.<span style=""> </span>The annual income tax becomes due and payable without need of any prior assessment by the BIR.<span style=""> </span>The BIR may or may not investigate or audit the annual income tax return filed by the taxpayer.<span style=""> </span>The taxpayer’s liability for the income tax does not depend on whether or not the BIR conducts such subsequent investigation or audit.<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span>However, if the taxing authority is first required to investigate, and after such investigation to issue the tax assessment that creates the tax liability, then the tax is no longer self-assessed.<span style=""> </span>(Dissent of J. Carpio in <i style="">Philippine National Oil Company v. Court of Appeals, et al., </i>G. R. No. 109976, April 26, 2005 and companion case)<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><o:p> </o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span><b style="">48.<span style=""> </span>On October 28, 1988 taxpayer bank received a notice of assessment from the BIR informing it that<span style=""> </span>deficiency taxes are due from the said taxpayer bank without any findings of law or fact but supported only with a computation.<span style=""> </span>On December 10, 1988, the taxpayer bank counsel<span style=""> </span>filed a letter that “as soon as this is explained and clarified in a proper notice of assessment, we shall inform you of the taxpayer’s decision on whether to pay or protest the assessment.”<span style=""> </span>The taxpayer bank insists that the assessment was not valid.<span style=""> </span>Of course, BIR took the opposite view contending further that there was no seasonable protest, hence the<span style=""> </span>tax is sue and<span style=""> </span>collectible.<span style=""> </span>Who is correct ?<o:p></o:p></b></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span><u>SUGGESTED ANSWER:</u><span style=""> </span>The BIR is correct. Under the old law Sec. 270, it is enough merely that the BIR Commissioner shall “notify the taxpayer of his findings<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span>The taxpayer bank counsel’s December 10, 1988 letter is not a seasonable protest because it was filed thirty (30) days after receipt of the assessment on October 28, 1988.<span style=""> </span>(<i style="">Commissioner of Internal Revenue v. Bank of Philippine Islands, </i>G. R. No. 134062, April 17, 2007)<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span><span style=""> </span><o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><o:p> </o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><b style=""><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span>49.<span style=""> </span>What are the prescriptive periods for making assessments of internal revenue taxes ?<i style=""><span style=""> </span><o:p></o:p></i></span></b></p> <p class="MsoNormal" style="text-align: justify;"><b style=""><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span></span></b><u><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US">SUGGESTED ANSWER:<o:p></o:p></span></u></p> <p class="MsoNormal" style="text-align: justify; text-indent: 0.5in;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US">a.<span style=""> </span>Three (3) years from the last day within which to file a return or when the return was actually filed, whichever is later (Sec. 203, NIRC of 1997).<span style=""> </span></span><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">The CIR has three (3) years from the date of actual filing of the tax return to assess a national internal revenue tax or to commence court proceedings for the collection thereof without an assessment.<span style=""> </span>[<i style="">Bank of Philippine Islands (Formerly Far East Bank and Trust Company) v. Commissioner of Internal Revenue, </i>G. R. No. 174942, March 7, 2008]<span style=""> </span><o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify; text-indent: 0.5in;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US">b.<span style=""> </span>ten years from discovery of the failure to file the tax return or discovery of falsity or fraud in the return [Sec. 222 (a), NIRC of 1997) ; or<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify; text-indent: 0.5in;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US">c.<span style=""> </span>within the period agreed upon between the government and the taxpayer where there is a waiver of the prescriptive period for assessment (Sec. 222 (b), NIRC of 1997). <o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify; text-indent: 0.5in;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><o:p> </o:p></span></p> <p class="MsoNormal" style="text-align: justify; text-indent: 0.5in;"><b style=""><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US">50.<span style=""> </span><span style=""> </span>Purpose of period of limitations in taxation.<span style=""> </span></span></b><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US">For the purpose of safeguarding taxpayers from any unreasonable examination, investigation or assessment, our tax law provides a statute of limitations in the collection of taxes. [<i style="">Commissioner of Internal Revenue v. B.F. Goodrich Phils, Inc., </i>(<i style="">now Sime Darby International Tire Co., Inc.</i>)<i style="">, et al.,</i> G.R. No. 104171, February 24, 1999, 303 SCRA 546; <i style="">Philippine Journalists, Inc. v. Commissioner of Internal Revenue, </i>G. R. No. 162852, December 16, 2004;],<i style=""> </i>as well as their assessments. <o:p></o:p></span></p> <p class="MsoNormal" style="margin-right: -4.5pt; text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span></span><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">The law prescribing a limitation of actions for the collection of the income tax is beneficial both to the Government and to its citizens; to the Government because tax officers would be obliged to act promptly in the making of assessment, and to citizens because after the lapse of the period of prescription citizens would have a feeling of security against unscrupulous tax agents who will always find an excuse to inspect the books of taxpayers, not to determine the latter’s real liability, but to take advantage of every opportunity to molest peaceful, law-abiding citizens. Without such a legal defense taxpayers would furthermore be under obligation to always keep their books and keep them open for inspection subject to harassment by unscrupulous tax agents. The law on prescription being a remedial measure should be interpreted in a way conducive to bringing about the beneficent purpose of affording protection to the taxpayer within the contemplation of the Commission which recommend the approval of the law.<span style=""> </span>[<i>Republic of the Philippines v. Ablaza, </i><span style=""> </span>108 Phil. 1105, 1108, cited in <i style="">Bank of Philippine Islands (Formerly Far East Bank and Trust Company) v. Commissioner of Internal Revenue, </i>G. R. No. 174942, March 7, 2008]<span style=""> </span><o:p></o:p></span></p> <p class="MsoNormal" style="margin-right: -4.5pt; text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><o:p> </o:p></span></p> <p class="MsoBodyText" style="margin-bottom: 0.0001pt; text-align: justify; text-indent: 0.3in;"><b style=""><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US">51.<span style=""> </span><span style=""> </span>Unreasonable investigation contemplates cases where the period for assessment extends indefinitely</span></b><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"> because this deprives the taxpayer of the assurance that it will not longer be subjected to further investigation for taxes after the expiration of a reasonable period of time.<span style=""> </span>(<i style="">Philippine Journalists, Inc. v. Commissioner of Internal Revenue, </i>G. R. No. 162852, December 16, 2004 with note to see <i style="">Republic v. Ablaza, </i>108 Phil. 1105. 1108)<o:p></o:p></span></p> <p class="MsoBodyText" style="margin-bottom: 0.0001pt; text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span>Laws on prescription should be liberally construed in favor of the taxpayer.<span style=""> </span>Reason:<span style=""> </span>for the purpose of safeguarding taxpayers from an unreasonable examination, investigation or assessment, our tax laws provide a statute of limitation on the collection of taxes. Thus, the law on prescription, being a remedial measure, should be liberally construed in order to afford such protection,<span style=""> </span>As a corollary, the exceptions to the law on prescription should perforce be strictly construed<b style="">.<span style=""> </span></b>[<i style="">Philippine Journalists, Inc. v. Commissioner of Internal Revenue, </i>G. R. No. 162852, December 16, 2004 citing <i style="">Commissioner of Internal Revenue v. B.F. Goodrich Phils, Inc (now Sime Darby International Tire Co., Inc.),., et al.,</i> G.R. No. 104171, February 24, 1999, 303 SCRA 546]<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify; text-indent: 0.5in;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US">The prescriptive period was precisely intended to give the taxpayers peace of mind. <i style="">(Commissioner of Internal Revenue v. B.F. Goodrich Phils.,<span style=""> </span>Inc., et al</i>., G.R. No. 104171, February 24, 1999)<i style=""><o:p></o:p></i></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><o:p> </o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span><b style="">52. <span style=""> </span>During Juliana’s lifetime, her business affairs were managed by the Philippine Trust Company (Philtrust).<span style=""> </span>She died on April 3, 2001.Two days after her death, Philtrust, through its Trust Officer, filed her Income Tax Return for 2000, without indicating that Juliana died.<span style=""> </span><o:p></o:p></b></span></p> <p class="MsoNormal" style="text-align: justify;"><b style=""><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span>On May 22, 2001, Philtrust filed a verified petition with the RTC for appointment as Special Administrator.<span style=""> </span>This was denied by the court who appointed one of the heirs as Special Administrator.<span style=""> </span>Philtrust’s motion for reconsideration was denied.<o:p></o:p></span></b></p> <p class="MsoNormal" style="text-align: justify;"><b style=""><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span>After an investigation by the BIR of the decedent’s income tax liability, it sent, on November 18, 2003, a demand letter and a Notice of Assessment to Juliana c/o Philtrust at the latter’s address which was stated in the 1998 Income Tax Return.<span style=""> </span>No response was made neither was the BIR advised that Juliana already died.<o:p></o:p></span></b></p> <p class="MsoNormal" style="text-align: justify;"><b style=""><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span>On June 18, 2005, the BIR Commissioner issued warrants of distraint and levy to enforce collection of the deficiency income tax liability which was served on Juliana’s heir.<span style=""> </span>On November 22, 2005, the BIR filed with the estate court a motion for allowance of claim.<span style=""> </span>The heir claimed that there was no proper service of the notice of assessment and that the filing of the motion was time-barred.<span style=""> </span>On the other hand the BIR made the submission that both the issuance of the assessment notice and the motion were all properly made on Philtrust.<span style=""> </span>Furthermore the lapse of the 30-day period within which to protest made the assessment final, executory and uncontestable and not time barred.<o:p></o:p></span></b></p> <p class="MsoNormal" style="text-align: justify;"><b style=""><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span>Rule on the conflicting claims of the parties.<o:p></o:p></span></b></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span><u>SUGGESTED ANSWER</u>:<span style=""> </span>I would rule in favor of the heir.<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span>There was no proper service of the notice of assessment because the death of Juliana automatically severed the legal relationship of principal and agent between her and Philtrust.<span style=""> </span>The severed relationship could not be revived on the mere fact that Philtrust filed her Tax Return two days after her death.<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span>Philtrust’s failure to file a notice of death subjects it to penal sanctions which do not include the indefinite tolling of the prescriptive period for making deficiency tax assessments, or the waiver of the notice requirement for such assessments. (<i style="">Estate of the late Juliana Diez Vda. de Gabriel v. Commissioner of Internal Revenue, </i>G.R. No. 155541, January 27, 2004)<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><o:p> </o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span><b style=""><span style=""> </span><span style=""> </span><span style=""> </span>53.<span style=""> </span>What is the presumption that flows from a taxpayer’s failure to protest an assessment ?<o:p></o:p></b></span></p> <p class="MsoBodyText" style="margin-bottom: 0.0001pt; text-align: justify; text-indent: 0.3in;"><b style=""><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span><span style=""> </span></span></b><u><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US">SUGGESTED ANSWER:</span></u><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span>“Tax assessments by tax examiners are presumed correct and made in good faith.<span style=""> </span>The taxpayer has the duty to prove otherwise.<span style=""> </span>In the absence of proof of any irregularities in the performance of duties, an assessment duly made by a Bureau of Internal Revenue examiner and approved by his superior officers will not be disturbed.<span style=""> </span>All presumptions are in favor of the correctness of tax assessments.”<span style=""> </span>(<i style="">Commissioner of Internal Revenue v. Bank of Philippine Islands., </i>G, R. No. 134062, April 17, 2007 citing <i style="">Sy Po v. Court of Appeals, </i>G. R. No. L-81446, 18 August 1988, 164 SCRA 524, 530, citations omitted)<o:p></o:p></span></p> <p class="MsoBodyText" style="margin-bottom: 0.0001pt; text-align: justify; text-indent: 0.3in;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><o:p> </o:p></span></p> <p class="MsoBodyText" style="margin-bottom: 0.0001pt; text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span><b style="">54. What are the reasons for presumption of correctness of assessments ?<i style=""> <o:p></o:p></i></b></span></p> <p class="MsoBodyText" style="margin-bottom: 0.0001pt; text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span><u>SUGGESTED ANSWER</u>:<b style=""> <o:p></o:p></b></span></p> <p class="MsoBodyText" style="margin-bottom: 0.0001pt; text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span><span style=""> </span>a.<span style=""> </span><span style=""> </span>Lifeblood theory<o:p></o:p></span></p> <p class="MsoBodyText" style="margin-bottom: 0.0001pt; text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span>b. <span style=""> </span>Presumption of regularity (<i style="">Commissioner of Internal Revenue v. Hantex Trading Co., Inc., </i>G, R. No. 136975, March 31, 2005)<span style=""> </span>in the performance of public functions.<span style=""> </span>(<i style="">Commissioner of Internal Revenue v. Tuazon, Inc.,</i> 173 SCRA 397)<o:p></o:p></span></p> <p class="MsoBodyText" style="margin-bottom: 0.0001pt; text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span>c.<span style=""> </span>The likelihood that the taxpayer will have access to the relevant information [<i style="">Commissioner of Internal Revenue, supra </i>citing <i style="">United States v. Rexach, </i>482 F.2d 10 (1973).<span style=""> </span>The certiorari was denied by the United States Supreme Court on November 19, 1973)<o:p></o:p></span></p> <p class="MsoBodyText" style="margin-bottom: 0.0001pt; text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span>d.<span style=""> </span>The desirability of bolstering the record-keeping requirements of the NIRC.<span style=""> </span>(<i style="">Ibid.</i>)<o:p></o:p></span></p> <p class="MsoBodyText" style="margin-bottom: 0.0001pt; text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><o:p> </o:p></span></p> <p class="MsoBodyText" style="margin-bottom: 0.0001pt; text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span><b style="">55.<span style=""> </span>Give instances where prima facie correctness of a tax assessment does not apply.</b><o:p></o:p></span></p> <p class="MsoBodyText" style="margin-bottom: 0.0001pt; text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span><u>SUGGESTED ANSWER:</u><span style=""> </span>The “<i style="">prima facie</i> correctness of a tax assessment does not apply upon proof that an assessment is utterly without foundation, meaning it is arbitrary and capricious.<span style=""> </span>Where the BIR has come out with a “naked assessment” i.e., without any foundation character, the determination of the tax due is without rational basis.” [<i style="">Commissioner of Internal Revenue v. Hantex Trading Co., Inc., </i>G, R. No. 136975, March 31, 2005 citing <i style="">United States v. Janis, </i>49 L. Ed. 2d 1046 (1976); 428 US 433 (1976)]<span style=""> </span>In such a situation, “the determination of the Commissioner contained in a deficiency notice disappears.” [<i style="">Commissioner of Internal Revenue, supra </i>citing a U.S. Court of Appeals ruling, in <i style="">Clark and Clark v. Commissioner of Internal Revenue, </i>266 F. 2d 698 (1959)]<span style=""> </span>“Hence, the determination by the CTA must rest on all the evidence introduced and its ultimate determination must find support in credible evidence.” [<i style="">Commissioner of Internal Revenue, supra</i>] <o:p></o:p></span></p> <p class="MsoBodyText" style="margin-bottom: 0.0001pt; text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><o:p> </o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><b style=""><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span><span style=""> </span>56.<span style=""> </span></span></b><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span><b style="">What are the instances that suspends the running of the prescriptive periods (Statute of Limitations) within which to make an assessment and the beginning of distraint or levy or of a proceeding in court for the collection, in respect of any tax deficiencies?<o:p></o:p></b></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span><u>SUGGESTED ANSWER:<o:p></o:p></u></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span>a.<span style=""> </span>When the Commissioner is prohibited from making the assessment, or beginning distraint, or levy or proceeding in court and for sixty (60) days thereafter;<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span>b.<span style=""> </span>When the taxpayer requests for and is granted a reinvestigation by the commissioner;<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span>c.<span style=""> </span>When the taxpayer could not be located in the address given by him in the return filed upon which the tax is being assessed or collected;<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span>d.<span style=""> </span>When the warrant of distraint and levy is duly served upon the taxpayer, his authorized representative, or a member of his household with sufficient discretion, and no property could be located; and<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span>e.<span style=""> </span>When the taxpayer is out of the Philippines.<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span><o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US">:<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><o:p> </o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span><b style="">57.<span style=""> </span><span style=""> </span>The signatures of both the Commissioner and the taxpayer, are required for a waiver of the prescriptive period</b>, thus a unilateral waiver on the part of the taxpayer does not suspend the prescriptive period.<span style=""> </span>[<i style="">Commissioner of Internal Revenue v. Court of Appeals, et al., </i>G.R. No. 115712, February 25, 1999 (Carnation case)]<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><o:p> </o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span><b style="">58.<span style=""> </span><span style=""> </span>The act of requesting a reinvestigation alone does not suspend the running of the prescriptive period.<span style=""> </span></b></span><b style=""><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">The request for reinvestigation must be granted by the CIR.</span></b><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>The Supreme Court<span style=""> </span>declared that the burden of proof that the request for reinvestigation had been actually granted shall be on the Commissioner of Internal Revenue.<span style=""> </span>Such grant may be expressed in its communications with the taxpayer or implied from the action of the Commissioner or his authorized representative in response to the request for reinvestigation.<span style=""> </span>[<i style="">Bank of Philippine Islands (Formerly Far East Bank and Trust Company) v. Commissioner of Internal Revenue, </i>G. R. No. 174942, March 7, 2008]<span style=""> </span><span style="letter-spacing: -0.1pt;"><o:p></o:p></span></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><o:p> </o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span><b style="">59.<span style=""> </span>Philippine Journalists, Inc. (PJI) filed its Annual Income Tax Return for the calendar year ended December 31, 1994 which showed a net income of P30 million and the tax due as P10 million.<span style=""> </span>An examination of PJI’s books of account and other accounting records for the period January 1, 1994 to December 31, 1994 showed deficiency VAT, Income Tax and Withholding Tax in the total amount of P1`27 million.<span style=""> </span>During the September 22, 1997 informal conference with the Revenue District Officer, PJI’s Comptroller executed a waiver of statute of limitations provided for under sections 223 and 224 of the NIRC.<span style=""> </span>On<i style=""> </i>October 5, 1998, the BIR issued a Pre-Assessment Notice which was followed by Assessment/Demand No.33-1-000757-94 stating a total deficiency taxes in the amount of P111 million for income tax, VAT and expanded withholding taxes, inclusive of interest and compromise penalty.<o:p></o:p></b></span></p> <p class="MsoNormal" style="text-align: justify;"><b style=""><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span>On March 16, 1999, the BIR sent to PJI a Preliminary Collection Letter to pay the assessment within 10 days from receipt.<span style=""> </span>On November 10,1999, a Final Notice Before Seizure was issued giving PJI 10 days from receipt within which to pay.<span style=""> </span>PJI received the final notice on November 24, 1999 and on November 26, 1999 PJI asked that it be clarified on how the tax liability of P111 million was arrived at and requested for an extension of 30 days from receipt of the clarification within which to reply.<span style=""> </span>PJI, through a follow-up letter, asserted it never received Assessment/Demand No. 33-1-000757-94. On March 28, 2000 PJI received a Warrant of Distraint and/or Levy.<span style=""> </span>PJI then appealed to the CTA.<o:p></o:p></span></b></p> <p class="MsoNormal" style="text-align: justify;"><b style=""><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span>The following issues are for resolution in the appeal:<o:p></o:p></span></b></p> <p class="MsoNormal" style="text-align: justify;"><b style=""><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span>a.<span style=""> </span>Does the CTA have jurisdiction over the appeal ?<o:p></o:p></span></b></p> <p class="MsoNormal" style="text-align: justify;"><b style=""><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span>b.<span style=""> </span>Was the Waiver of the Statute of Limitations valid ?<o:p></o:p></span></b></p> <p class="MsoNormal" style="text-align: justify;"><b style=""><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span>c.<span style=""> </span>Were the Assessment/Demand and the Warrant of Distraint and/or Levy valid ?<span style=""> </span><o:p></o:p></span></b></p> <p class="MsoNormal" style="text-align: justify;"><b style=""><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span>Will the appeal prosper?<span style=""> </span>Explain briefly your answer.<o:p></o:p></span></b></p> <p class="MsoNormal" style="text-align: justify; text-indent: 0.3in;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span><u>SUGGESTED ANSWER:</u><span style=""> </span>Yes, it will prosper.<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span>a.<span style=""> </span>The CTA has jurisdiction to determine if the warrant of distraint and levy issued by the BIR is valid and to rule if the Waiver of the Statute of Limitations was validly effected.<span style=""> </span>This is so because the CTA has exclusive appellate jurisdiction to review by appeal decisions of the Commissioner of Internal Revenue in cases involving “other matters arising under the National Internal Revenue Code or other laws administered by the Bureau of Internal Revenue.”<span style=""> </span>[Sec. 7 (a) (1). R. A. No. 1125, as amended by R. A. No. 9282)<span style=""> </span>Thus it was previously ruled that the CTA had jurisdiction to act on a petition to invalidate and annul the distraint orders of the Commissioner. [Ynares-Santiago, J.<span style=""> </span><i style="">Philippine Journalists, Inc. v. Commissioner of Internal Revenue, </i>G. R. No. 162852, December 16, 2004 citing <i style="">Panrtoja v. David, </i>111 Phil. 197; 1 SCRA 608 (1961)]<span style=""> </span>Likewise upheld by the Supreme Court was the decision of the CTA declaring several waivers executed by the taxpayer as null and void, thus invalidating the assessments issued by the BIR. (<i style="">Ibid., </i>citing <i style="">Commissioner of Internal Revenue v. Court of Appeals, </i>G. R. No. 115712, 25 February 1999, 303 SCRA 614)<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span>b.<span style=""> </span>The Waiver of the Statute of Limitations is not valid because it did not specify a definite agreed date between the BIR and PJI, within which the former may assess and collect revenue taxes.<span style=""> </span>Furthermore, the waiver is also defective from the government side because it was signed only by a revenue district officer, and not the Commissioner, as so required.<span style=""> </span>Finally, PJI was not furnished a copy of the waiver.<span style=""> </span><o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span>c.<span style=""> </span>The waiver document is incomplete and defective and thus the three-year prescriptive period within which to assess was not tolled or extended and continued to run until April 17, 1998.<span style=""> </span>Consequently, Assessment/Demand No. 33-1-000757-94 issued on December 9, 1998 was invalid because it was issued beyond the three (3) year period.<span style=""> </span>In the same manner, the Warrant of Distraint and/or Levy which PJI received on March 28, 2000 is also null and void for having been issued pursuant to an invalid assessment.<span style=""> </span>(<i style="">Philippine Journalists, Inc. v. Commissioner of Internal Revenue, </i>G. R. No. 162852, December 16, 2004)<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><o:p> </o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span><b style="">60.<span style=""> </span>What are the two ways of protesting an assessment notice for an internal revenue tax ? Alternatively, what are the two types of protests ? Explain briefly.<o:p></o:p></b></span></p> <p class="MsoNormal" style="text-align: justify;"><b style=""><i style=""><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span></span></i></b><u><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US">SUGGESTED ANSWER:<o:p></o:p></span></u></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span>a.<span style=""> </span>Request for reconsideration which refers to a plea for re-evaluation of an assessment on the basis of existing records without need of additional evidence.<span style=""> </span>It may involve both a question of fact or of law or both.<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span>b.<span style=""> </span>Request for reinvestigation which refers to a plea for re-evaluation of an assessment on the basis of newly-discovered evidence or additional evidence that a taxpayer intends to present in the investigation.<span style=""> </span>It may also involve a question of fact or law or both.<span style=""> </span>(<i style="">Commissioner of Internal Revenue v. Philippine Global Communication, Inc., </i>G. R. No. 167146, October 31, 2006 citing Rev. Regs. No. 12-85)<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><o:p> </o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span><b style="">61.<span style=""> </span>What is that type of protest that suspends the running of the statute of limitations for the beginning of distraint or levy or a proceeding in court for collection ?<span style=""> </span>Why ?<o:p></o:p></b></span></p> <p class="MsoNormal" style="text-align: justify;"><b style=""><i style=""><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span></span></i></b><u><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US">SUGGESTED ANSWER:</span></u><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span>It is that type of protest “when the taxpayer requests for a reinvestigation which is granted by the Commissioner” (Sec. 223, NIRC of 1997), that suspends the running of the statute of limitations for collection of the tax.<span style=""> </span>(<i style="">Commissioner of Internal Revenue v. Philippine Global Communication, Inc., </i>G. R. No. 167146, October 31, 2006 citing Sec. 271, now Sec. 223, NIRC of 1997)<span style=""> </span>When a taxpayer demands a reinvestigation, the time employed in reinvestigation should be deducted from the total period of limitation.<span style=""> </span>[<i style="">Commissioner of Internal Revenue, supra </i>citing <i style="">Republic v. Lopez, </i>117 Phil. 575, 578;<span style=""> </span>7 SCRA 566, 568-569 (1963)]<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span>Undoubtedly, a reinvestigation, which entails the reception and evaluation of additional evidence, will take more time than a reconsideration of a tax assessment which will be limited to the evidence already at hand; this justifies why the former can suspend the running of the statute of limitations on collection of the assessed tax, while the latter cannot.<span style=""> </span>(<i style="">Commissioner of Internal Revenue v. Philippine Global Communication, Inc., </i>G. R. No. 167146, October 31, 2006 citing <i style="">Bank of Philippine Islands v. Commissioner of Internal Revenue, </i>G. R. No. 139736, 17 October 2005, 473 SCRA 205, 230-231)<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><o:p> </o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span><b style="">62.<span style=""> </span>A compromise is a contract</b> whereby the parties, by making reciprocal concessions, avoid a litigation or put an end to one already commenced.<span style=""> </span>(Art. 2028, Civil Code)<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span><span style=""> </span>A compromise penalty could not be imposed by the BIR, if the taxpayer did not agree.<span style=""> </span>A compromise being, by its nature, mutual in essence requires agreement.<span style=""> </span>The payment made under protest could only signify that there was no agreement that had effectively been reached between the parties.<span style=""> </span>(<i style="">Vda. de San Agustin, et al., v. Commissioner of Internal Revenue</i>, G. R. No. 138485, September 10, 2001)<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span><o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify; text-indent: 0.5in;"><b style=""><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">63.<span style=""> </span></span></b><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">A compromise is a contract whereby the parties, by making reciprocal concessions, avoid a litigation or put an end to one already commenced.<span style=""> </span>(Art. 2028, Civil Code)<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><o:p> </o:p></span></p> <p class="MsoNormal" style="text-align: justify; text-indent: 0.5in;"><b style=""><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">64.<span style=""> </span></span></b><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">A compromise penalty could not be imposed by the BIR, if the taxpayer did not agree.<span style=""> </span>A compromise being, by its nature, mutual in essence requires agreement.<span style=""> </span>The payment made under protest could only signify that there was no agreement that had effectively been reached between the parties.<span style=""> </span>(<i style="">Vda. de San Agustin, et al., v. Commissioner of Internal Revenue, G. R. No. 138485, September 10, 2001)<o:p></o:p></i></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><o:p> </o:p></span></p> <p class="MsoNormal" style="text-align: justify; text-indent: 0.5in;"><b style=""><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">65.<span style=""> </span></span></b><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">The following cases may, upon taxpayer’s compliance with the basis for compromise, be the subject matter of compromise settlement:<span style=""> </span><o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify; text-indent: 0.5in;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">a.<span style=""> </span>Delinquent accounts;<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>b. Cases under administrative protest after issuance of the Final Assessment Notice to the taxpayer which are still pending in the Regional Offices, Revenue District Offices, Legal Service, Large Taxpayer Service (LTS), Collection Service, Enforcement Service and other offices in the National Office;<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>c.<span style=""> </span>Civil tax cases being disputed before the courts;<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>d.<span style=""> </span>Collection cases filed in courts; <o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>e.<span style=""> </span>Criminal violations, other than those already filed in court, or those involving criminal tax fraud.<span style=""> </span>(Sec. 2, Rev. Regs. No. 30-2002)<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span><o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify; text-indent: 0.5in;"><b style=""><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">66.<span style=""> </span></span></b><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">Tax cases which could not be the subject of compromise:<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify; text-indent: 0.5in;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">a.<span style=""> </span>Withholding tax cases unless the applicant-taxpayer invokes provisions of law that cast doubt on the taxpayer’s obligation to withhold.;<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify; text-indent: 0.5in;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">b.<span style=""> </span>Criminal tax fraud cases, confirmed as such by the Commissioner of Internal Revenue or his duly authorized representative;<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>c.<span style=""> </span>Criminal violations already filed in court; <o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify; text-indent: 0.5in;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">d.<span style=""> </span>Delinquent accounts with duly approved schedule of installment payments;<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify; text-indent: 0.5in;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">e.<span style=""> </span>Cases where final reports of reinvestigation or reconsideration have been issued resulting to reduction in the original assessment and the taxpayer is agreeable to such decision by signing the required agreement form for the purpose.<span style=""> </span>On the other hand, other protested cases shall be handled by the Regional Evaluation Board (REB) or the National Evaluation Board (NEB) on a case to case basis;<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify; text-indent: 0.5in;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">f.<span style=""> </span>Cases which become final and executory after final judgment of a court where compromise is requested on the ground of doubtful validity of the assessment; and<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify; text-indent: 0.5in;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">g.<span style=""> </span>Estate tax cases where compromise is requested on the ground of financial incapacity of the taxpayer.<span style=""> </span>(Sec. 2, Rev. Regs. No. 30-2002)<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><o:p> </o:p></span></p> <p class="MsoNormal" style="text-align: justify; text-indent: 0.5in;"><b style=""><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">67.<span style=""> </span></span></b><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">The Commissioner may compromise the payment of any internal revenue tax when:<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify; text-indent: 0.5in;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">a.<span style=""> </span>A reasonable doubt as to the validity of the claim against the taxpayer exists provided that the minimum compromise entered into is equivalent to forty percent (40%) of the basic tax; or<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify; text-indent: 0.5in;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">b.<span style=""> </span>The financial position of the taxpayer demonstrates a clear inability to pay the assessed tax provided that the minimum compromise entered into is equivalent to ten percent (10%) of the basic assessed tax<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>In the above instances the Commissioner is allowed to enter into a compromise only if the basic tax involved does not exceed One million pesos (P1,000,000.00), and the settlement offered is not less than the prescribed percentages.<span style=""> </span>[Sec. 204 (A), NIRC of 1997]<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>In instances where the Commissioner is not authorized, the compromise shall be subject to the approval of the Evaluation Board composed of the Commissioner and the four (4) Deputy Commissioners.<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><o:p> </o:p></span></p> <p class="MsoNormal" style="text-align: justify; text-indent: 0.5in;"><b style=""><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">68.<span style=""> </span></span></b><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">The Commissioner of Internal Revenue is authorized to abate or cancel a tax liability, when:<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify; text-indent: 0.5in;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">a.<span style=""> </span>The tax or any portion thereof appears to be unjustly or excessively assessed; or<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify; text-indent: 0.5in;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">b.<span style=""> </span>The administration and collection costs involved do not justify the collection of the amount due. [Sec. 204 (B), NIRC of 1997]<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span><u><o:p></o:p></u></span></p> <p class="MsoNormal" style="text-align: justify; text-indent: 0.5in;"><b style=""><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">69.<span style=""> </span></span></b><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">The offer to compromise a delinquent account or disputed assessment on the ground of reasonable doubt as to the validity of the assessment may be accepted when it is shown that:<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>a.<span style=""> </span>The delinquent account or disputed assessment is one resulting from a jeopardy assessment. or <o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>b.<span style=""> </span>The assessment seems to be arbitrary in nature, appearing to be based on presumptions and there is reason to believe that it is lacking in legal and/or factual basis; or<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>c.<span style=""> </span>The taxpayer failed to file an administrative protest on account of the alleged failure to receive notice of assessment and there is reason to believe that the assessment is lacking in legal and/or factual basis; or <o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>d.<span style=""> </span>The taxpayer failed to file a request for reinvestigation/reconsideration within 30 days from receipt of final assessment notice and there is reason to believe that the assessment is lacking in legal and/or factual basis; or<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>e.<span style=""> </span>The taxpayer failed to elevate to the Court of Tax Appeals (CTA) an adverse decision of the Commissioner, or his authorized representative, in some cases, within 30 days from receipt thereof and there is reason to believe that the assessment is lacking in legal and/or factual basis; or<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>f.<span style=""> </span>The assessments were issued on or after January 1, 1998, where the demand notice allegedly failed to comply with the formalities under Sec. 228 of the National Internal Revenue Code of 1997; or<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>g.<span style=""> </span>Assessments made based on the “Best Evidence Obtainable Rule” and there is reason to believe that the same can be disputed by sufficient and competent evidence; or<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>h.<span style=""> </span>The assessment was issued within the prescriptive period for assessment as extended by the taxpayer’s execution of Waiver of the Statute of Limitations the validity or authenticity of which is being questioned or at issue and there is strong reason to believe and evidence to prove that it is not authentic.<span style=""> </span>(Sec. 3, 1, Rev. Regs. No. 30-3002)<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><o:p> </o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span><b style="">70.<span style=""> </span></b>The offer to compromise based on financial incapacity may be accepted upon showing that:<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify; text-indent: 0.5in;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">a.<span style=""> </span>The corporation ceased operation or is already dissolved Provided, that tax liabilities corresponding to the Subscription Receivable or Assets distributed/distributable to the stockholders representing return of capital at the time of cessation of operation or dissolution of business shall not be considered for compromise; or<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>b.<span style=""> </span>The taxpayer, as reflected in its latest Balance Sheet supposed to be filed with the Bureau of Internal Revenue, is suffering from surplus or earnings deficit resulting to impairment in the original capital by at least 50%, provided that amounts payable to due to stockholders other than business-related transactions which are properly ineludible in the regular “accounts payable” are by fiction of law considered as part of capital and not liability, and provided further that the taxpayer has no sufficient liquid asset to satisfy the tax liability; or <o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>c.<span style=""> </span>The taxpayer is suffering from a networth deficit (total liabilities exceed total assets) computed by deducting total liabilities (net of deferred credits and amounts payable to stockholders/owners reflected as liabilities, except business-related transactions) from total assets (net of prepaid expenses, deferred charges, pre-operating expenses, as well as appraisal increases in fixed assets) taken from the latest audited financial statements, provided that in the case of an individual taxpayer, he has no other leviable properties under the law other than his family home; or <o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>d.<span style=""> </span>The taxpayer is a compensation income earner with no other source of income and the family’s gross monthly compensation income does not exceed, if single, P10,500 or less, or if married, whose salary together with his spouse is P21,000 per month, or less, and it appears that the taxpayer possesses no other leviable/distrainable assets other than his family home; or<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>e.<span style=""> </span>The taxpayer has been declared by any competent tribunal/ authority/body/government agency as bankrupt or insolvent. (Sec. 3. 2, Rev. in relation to Sec.4.1.1 both of Regs. No. 30-3002)<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><o:p> </o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><o:p> </o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span><b style="">71.<span style=""> </span>What is the prescriptive period for collecting internal revenue taxes ?<o:p></o:p></b></span></p> <p class="MsoNormal" style="text-align: justify;"><b style=""><i style=""><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span></span></i></b><u><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US">SUGGESTED ANSWER:</span></u><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span>There are four (4) prescriptive periods for the collection of an internal revenue tax:<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span>a.<span style=""> </span><u>Collection upon a false or fraudulent return or no return without assessment</u>.<span style=""> </span>In case of a false or fraudulent return with the intent to evade tax or of failure to file a return, “a proceeding in court for the collection of such tax may be filed without assessment, at any time within ten (10) years after the discovery of the falsity, fraud or omission.”<span style=""> </span>[Sec. 222 (a), NIRC of 1997)<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span>b.<span style=""> </span><u>Collection upon a false or fraudulent return or no return with assessment.</u><span style=""> </span>Any internal revenue tax which has been assessed (because the return is false or fraudulent with intent to evade tax or of failure to fail a return), within a period of ten (10) years from discovery of the falsity, fraud or omission “<b style="">may be collected by distraint or levy or by a proceeding in court within five (5) years following the assessment of the tax</b>.”<span style=""> </span>[Sec. 222 (c), in relation to Sec. 222 (a) NIRC of 1997, emphasis supplied)<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span>c.<span style=""> </span><u>Collection upon an extended assessment.</u><span style=""> </span>Where a tax has been assessed with the period agreed upon between the Commissioner and the taxpayer in writing (which should initially be within three (3) years from the time the return was filed or should have been filed), or any extensions before the expiration of the period agreed upon, the <b style="">tax “may be collected by distraint or levy or by a proceeding in court</b> <b style="">within the period agreed upon in writing before the expiration of the five (5) year period</b>.<span style=""> </span>The period so agreed upon may be extended by subsequent written agreements made before the expiration of the period previously agreed upon.”<span style=""> </span>[Sec. 222 (d), in relation to Secs. 222 (b) and 203, NIRC of 1997, emphasis supplied)<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span>d.<span style=""> </span><u>Collection upon a return that is not false or fraudulent, or where the assessment is not an extended assessment.</u><span style=""> </span>“Except as provided in Section 222, internal revenue taxes shall be assessed within three (3) years after the last day prescribed by law for the filing of the return, and <b style="">no proceeding in court without assessment for the collection of such taxes shall be begun after the expiration of such period</b>; Provided, That in case where a return is filed beyond the period prescribed by law, the three (3) year period shall be computed from the day the return was filed.<span style=""> </span>For purposes of this Section, a return filed before the last day prescribed by law for the filing thereof shall be considered filed on such last day.”<span style=""> </span>(Sec. 203, NIRC of 1997, emphasis supplied)<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span></span><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">When the BIR validly issues an assessment within the three (3)-year period, it has another three (3) years within which to collect the tax due by distraint, levy, or court proceeding.<span style=""> </span>The assessment of the tax is deemed made and the three (3)-year period for collection of the assessed tax begins to run on the date the assessment notice had been released, mailed or sent to the taxpayer.<span style=""> </span>[<i style="">Bank of Philippine Islands (Formerly Far East Bank and Trust Company) v. Commissioner of Internal Revenue, </i>G. R. No. 174942,<span style=""> </span>March 7, 2008 citing<span style=""> </span><i style="">BPI v. Commissioner of Internal Revenue</i>, G.R. No. 139736, 17 October 2005, 473 SCRA 205, 222-223)<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span><span style=""> </span><o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><o:p> </o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span><b style="">72.<span style=""> </span>What is solutio indebeti as applied to tax cases ?<o:p></o:p></b></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span><u>SUGGESTED ANSWER</u>:<span style=""> </span>This is erroneous payment of taxes and occurs when the taxpayer pays under a mistake of fact, as for the instance in a case where he is not aware of an existing exemption in his favor at the time the payment was made.<span style=""> </span>Such payment is held to be not voluntary and therefore, can be recovered or refunded. (<i style="">Commissioner of Internal Revenue v. Acesite (Philippines) Hotel Corporation, </i>G. R. No. 147295, February 16, 2007)<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span></span><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify; text-indent: 0.5in;"><b style=""><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US">73.</span></b><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span><b style="">What are the reasons for requiring the filing of an administrative application for refund or credit with the Bureau of Internal Revenue before a case may be filed with the Court of Tax Appeals ?</b></span><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify; text-indent: 0.5in;"><u><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US">SUGGESTED<span style=""> </span>ANSWER</span></u><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US">:<span style=""> </span>The filing of an administrative claim for refund with the BIR, before filing a case with the Court of Tax Appeals,<span style=""> </span>is necessary for the following reasons:<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify; text-indent: 0.5in;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US">a.<span style=""> </span><span style=""> </span>To afford the Commissioner an opportunity to correct his errors or that of subordinate officers.<span style=""> </span><i style="">(Gonzales v. Court of Tax Appeals, et al., </i>14 SCRA 79)</span><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify; text-indent: 0.5in;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US">b.<span style=""> </span>To notify the Government that such taxes have been questioned and the notice should be borne in mind in estimating the revenue available for expenditures.<span style=""> </span><i style="">(Bermejo v. Collector, </i>G.R. No. L-3028, July 28, 1950)<i style=""><o:p></o:p></i></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span><o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span><b style=""><span style=""> </span>74.<span style=""> </span>As a general rule the filing of an application for refund or credit with the Bureau of Internal Revenue is an administrative precondition before a suit may be filed with the Court of Tax Appeals.<span style=""> </span>Is there any exception ?<o:p></o:p></b></span></p> <p class="MsoNormal" style="text-align: justify;"><b style=""><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span></span></b><u><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US">SUGGESTED ANSWER</span></u><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US">:<span style=""> </span>Yes.<span style=""> </span>The failure to first file a written claim for refund or credit is not fatal to a petition for review involving a disputed assessment where an assessment was disputed<span style=""> </span>but the protest was denied by the Bureau of Internal Revenue.<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify; text-indent: 0.5in;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US">To hold that the taxpayer has now lost the right to appeal from the ruling on the disputed assessment and require him to file a claim for a refund of the taxes paid as a condition precedent to his right to appeal, would in effect require of him to go<span style=""> </span>through a useless and needless ceremony that would only delay the disposition of the case, for the Commissioner would certainly disallow the claim for refund in the same way as he disallowed the protest against the assessment.<span style=""> </span>The law, should not be<span style=""> </span>interpreted as to result in absurdities<i style="">. (vda. de San Agustin., etc., v. Commissioner of Internal Revenue, </i>G.R. No. 138485, September 10, 2001 citing <i style="">Roman Catholic Archbishop of Cebu v. Collector of Internal Revenue, </i>4 SCRA 279)<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify; text-indent: 0.5in;"><b style=""><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><o:p> </o:p></span></b></p> <p class="MsoNormal" style="text-align: justify; text-indent: 0.5in;"><b style=""><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US">75.<span style=""> </span>What is the nature of the taxpayer’s remedy of either to ask for a refund of excess tax payments or to apply the same in payment of succeeding taxable periods’ taxes ?<o:p></o:p></span></b></p> <p class="MsoNormal" style="text-align: justify; text-indent: 0.5in;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US">ANSWER:<span style=""> </span>Sec. 69 of the 1977 NIRC (now Sec. 76 of the NIRC of 1997) provides that any excess of the total quarterly payments over the actual income tax computed in the adjustment or final corporate income tax return, shall either (a) be refunded to the corporation, or (b) may be credited against the estimated quarterly income tax liabilities for the quarters of the succeeding taxable year.<span style=""> </span>To ease the administration of tax collection, these remedies are in the alternative and the choice of one precludes the other.<span style=""> </span>Since the Bank has chosen the tax credit approach it cannot anymore avail of the tax refund. <i style="">(Philippine Bank of Communications v. Commissioner of Internal Revenue, et al., </i>G.R. No. 112024, January 28, 1999)<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span><o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span><b style="">76.<span style=""> </span>What is the “irrevocability rule” in claims for refund and what is the rationale behind this ?<span style=""> </span></b><u>SUGGESTED ANSWER:</u><span style=""> </span></span><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">A corporation entitled to a tax credit or refund of the excess estimated quarterly income taxes paid has two options: (1) to carry over the excess credit or (2) to apply for the issuance of a tax credit certificate or to claim a cash refund. If the option to carry over the excess credit is exercised, the same shall be irrevocable for that taxable period.<span style=""> </span><b style=""><span style="letter-spacing: -0.1pt;"><o:p></o:p></span></b></span></p> <p class="MsoFootnoteText" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>In exercising its option, the corporation must signify in its annual corporate adjustment return (by marking the option box provided in the BIR form) its intention either to carry over the excess credit or to claim a refund. To facilitate tax collection, these remedies are in the alternative and the choice of one precludes the other. [</span><i style=""><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">Systra Philippines, Inc., v. Commissioner of Internal Revenue, </span></i><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">G. R. No. 176290, September 21, 2007 citing </span><i><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">Philippine Bank of Communications v. Commissioner of Internal Revenue</span></i><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">, 361 Phil. 916 (1999)]<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify; text-indent: 0.5in;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">This is known as the irrevocability rule and is embodied in the last sentence of Section 76 of the Tax Code. The phrase “such option shall be considered irrevocable for that taxable period” means that the option to carry over the excess tax credits of a particular taxable year can no longer be revoked. <o:p></o:p></span></p> <p class="MsoFootnoteText" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>The rule prevents a taxpayer from claiming twice the excess quarterly taxes paid: (1) as automatic credit against taxes for the taxable quarters of the succeeding years for which no tax credit certificate has been issued and (2) as a tax credit either for which a tax credit certificate will be issued or which will be claimed for cash refund.<span style=""> </span>(<i style="">Systra Philippines, Inc., supra </i>citing De Leon, Hector, <span style="text-transform: uppercase;">The National Internal Revenue Code, </span>Seventh Edition, 2000, p. 430)<o:p></o:p></span></p> <p class="MsoFootnoteText" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><o:p> </o:p></span></p> <p class="MsoNormal" style="text-align: justify; text-indent: 0.5in;"><b style=""><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">77.<span style=""> </span>In the year 2000 Systra derived excess tax credits and exercised the option to carry them over as tax credits for the next taxable year.<span style=""> </span>However, the tax due for the next taxable year is lower than excess tax credits.<span style=""> </span>It now applies for a refund of the unapplied tax credits.<span style=""> </span>May its refund be granted ?<span style=""> </span>If the refund is denied, does Systra lose the<span style=""> </span>unapplied tax credits ? Explain briefly your answer.</span></b><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span><o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify; text-indent: 0.5in;"><u><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">SUGGESTED ANSWER:</span></u><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"> Systra’s claim for refund should be denied.<span style=""> </span>Once the carry over option was made, actually or constructively, it became forever irrevocable<b><i> </i></b>regardless of whether the excess tax credits were actually or fully utilized Under Section 76 of the Tax Code, a claim for refund of such excess credits can no longer be made. The excess credits will only be applied “against income tax due for the taxable quarters of the succeeding taxable years.”<o:p></o:p></span></p> <p class="MsoFootnoteText" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>Despite the denial of its claim for refund, Systra does not lose the unapplied tax credits.<span style=""> </span>The amount will not be forfeited in favor of the government but will remain in the taxpayer’s account. Petitioner may claim and carry it over in the succeeding taxable years, creditable against future income tax liabilities until fully utilized. (</span><i style=""><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">Systra Philippines, Inc., v. Commissioner of Internal Revenue, </span></i><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">G. R. No. 176290, September 21, 2007 citing </span><i><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">Philam Asset Management, Inc. v. Commissioner of Internal Revenue</span></i><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">, G.R. Nos. 156637/162004, 14 December 2005, 477 SCRA 761)<o:p></o:p></span></p> <p class="MsoFootnoteText" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span><span style=""> </span><b style="">Supposing in the above problem that Systra permanent ceased operations, what happens to the unapplied credits ?<o:p></o:p></b></span></p> <p class="MsoFootnoteText" style="text-align: justify;"><b style=""><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span></span></b><u><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">SUGGESTED ANSWER:</span></u><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>Where, the corporation permanently ceases its operations before full utilization of the tax credits it opted to carry over, it may then be allowed to claim the refund of the remaining tax credits. In such a case, the remaining tax credits can no longer be carried over and the irrevocability rule ceases to apply. <i>Cessante ratione legis, cessat ipse lex</i>.<span style=""> </span>(Footnote no. 23, </span><i style=""><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">Systra Philippines, Inc., v. Commissioner of Internal Revenue, </span></i><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">G. R. No. 176290, September 21, 2007)<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span></span><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span><b>78.<span style=""> </span></b></span><b style=""><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">Is it fatal to a claim for refund the failure of a taxpayer<span style=""> </span>to indicate in its tax return<span style=""> </span></span></b><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span><b style="">the option whether to request a refund or claim the excess withholding tax as tax credit for the succeeding taxable year ? <span style=""><o:p></o:p></span></b></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>SUGGESTED ANSWER:<span style=""> </span>No.<span style=""> </span>The option of requesting a tax refund or claiming a tax credit is in the alternative. <span style=""> </span><o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>A corporation must signify its intention – whether to request a tax refund or claim a tax credit – by marking the corresponding option box provided in the FAR. While a taxpayer is required to mark its choice in the form provided by the </span><st1:stockticker><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">BIR</span></st1:stockticker><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">, this requirement is only for the purpose of facilitating tax collection.<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>One cannot get a <i style="">tax refund</i> and a <i style="">tax credit</i> at the same time for the same excess income taxes paid.<span style=""> </span>Failure to signify one’s intention in the FAR does not mean outright barring of a valid request for a refund, should one still choose this option later on. A tax credit should be construed merely as an alternative remedy to a tax refund, subject to prior verification and approval by the BIR..<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>The reason for requiring that a choice be made in the FAR upon its filing is to ease tax administration, particularly the self-assessment and collection aspects.<span style=""> </span>A taxpayer that makes a choice expresses certainty or preference and thus demonstrates clear diligence.<span style=""> </span>Conversely, a taxpayer that makes no choice expresses uncertainty or lack of preference and hence shows simple negligence or plain oversight.<span style=""> </span>(Commissioner of Internal Revenue v. PERF Realty Corporation, G.R. No. 163345, July 4, 2008, citing <i style="">Philam Asset Management, Inc. v. Commissioner of Internal Revenue</i>,<sup> </sup>G.R. Nos. 156637 & 162004, December 14, 2005, 477 SCRA 761)<span style=""> </span><b style=""><span style=""> </span></b><o:p></o:p></span></p> <p class="MsoNormal" style="margin: 0in 0.5in 0.0001pt; text-align: justify; text-indent: 0.5in;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><o:p> </o:p></span></p> <p class="MsoFootnoteText" style="text-align: justify; text-indent: 0.5in;"><b style=""><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">79.<span style=""> </span>Tax credit, defined.<span style=""> </span></span></b><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">A tax credit is not specifically d<a name="hit7"></a>efined in our Tax Code, but Art. 21 of EO 226 defines a tax credit as “any of the credits against taxes and/or duties equal to those actually paid or would have been paid to evidence which a tax credit certificate shall be issued by the Secretary of Finance or his representative, or the Board (of Investments), if so delegated by the Secretary of Finance.” Tax credits were granted under EO 226 as incentives to encourage investments in certain businesses.<span style=""> </span>A tax credit generally refers to an amount that may be “subtracted directly from one’s total tax liability.”<a name="_ftnref14"> [<i style="">Pilipinas Shell Petroleum Corporation v. Commissioner of Internal Revenue, </i>G. R. No. 172598, December 21, 2007 citing Garner, ed., <span style="text-transform: uppercase;">Black’s Law Dictionary</span> 1501 (8th ed., 1999)]<o:p></o:p></a></span></p> <span style=""></span> <p class="MsoNormal" style="text-align: justify; text-indent: 0.5in;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">It is therefore an “allowance against the tax itself” [<i style="">Pilipinas Shell, supra </i>citing Smith, <span style="text-transform: uppercase;">West’s Tax Law Dictionary</span> 177-178 (1993).] or “a deduction from what is owed” [<i style="">Ibid., </i>citing Oran and Tosti, <span style="text-transform: uppercase;">Oran’s Dictionary of the Law</span> 124 (3rd ed., 2000)], by a taxpayer to the government.<span style=""> </span>In RR 5-2000, “Prescribing the Regulations Governing the Manner of the Issuance of Tax Credit Certificates, and the Conditions for their Use, Revalidation and Transfer,” issued by then Secretary of Finance Jose T. Pardo on July 19, 2000. a tax credit is defined as “the amount due to a taxpayer resulting from an overpayment of a tax liability or erroneous payment of a tax due.” (Id., Section 1.A) <o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span>Tax credit generally refers to an amount that is subtracted directly from one’s total tax liability, an allowance against the tax itself, or a deduction from what is owned.<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span>A tax credit reduces the tax due, including –whenever applicable – the income tax that is determined after applying the corresponding tax rates to taxable income.<span style=""> </span>(<i style="">Commissioner of Internal Revenue v. Central Luzon Drug Corporation, </i>G. R. No. 159647, April 15, 2005)<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify; text-indent: 0.5in;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><o:p> </o:p></span></p> <p class="MsoNormal" style="text-align: justify; text-indent: 0.5in;"><b style=""><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">80.<span style=""> </span>Tax credit certificate (TCC), defined, and its nature.<span style=""> </span></span></b><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">A certification, duly issued to the taxpayer named therein, by the Commissioner or his duly authorized representative, reduced in a BIR Accountable Form in accordance with the prescribed formalities, acknowledging that the grantee-taxpayer named therein is legally entitled a tax credit, the money value of which may be used in payment or in satisfaction of any of his internal revenue tax liability (except those excluded), or may be converted as a cash refund, or may otherwise be disposed of in the manner and in accordance with the limitations, if any, as may be prescribed by the provisions of these Regulations. (<i style="">Pilipinas Shell Petroleum Corporation v. Commissioner of Internal Revenue, </i>G. R. No. 172598, December 21, 2007 citing RR 5-2000, “Prescribing the Regulations Governing the Manner of the Issuance of Tax Credit Certificates, and the Conditions for their Use, Revalidation and Transfer,” issued by then Secretary of Finance Jose T. Pardo on July 19, 2000, Sec. I, B)<b style=""><o:p></o:p></b></span></p> <p class="MsoBodyText" style="margin-bottom: 0.0001pt; text-align: justify; text-indent: 0.5in;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">It is clear that a TCC is an undertaking by the government through the BIR or DOF, acknowledging that a taxpayer is entitled to a certain amount of tax credit from either an overpayment of income taxes, a direct benefit granted by law or other sources and instances granted by law such as on specific unused input taxes and excise taxes on certain goods. As such, tax credit is transferable in accordance with pertinent laws, rules, and regulations.<o:p></o:p></span></p> <p class="MsoBodyText" style="margin-bottom: 0.0001pt; text-align: justify; text-indent: 0.5in;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">Therefore, the TCCs are immediately valid and effective after their issuance. <span style=""> </span>(<i style="">Pilipinas Shell Petroleum Corporation, supra) </i><span style=""> </span><o:p></o:p></span></p> <p class="MsoFootnoteText" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><o:p> </o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span><b style="">81.<span style=""> </span>Discuss the difference between tax refund and tax credit</b>.<i style=""><span style=""> </span><o:p></o:p></i></span></p> <p class="MsoNormal" style="text-align: justify; text-indent: 0.4in;"><u><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US">SUGGESTED ANSWER</span></u><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US">:<span style=""> </span>There are unmistakable formal and practical differences between the two modes.<span style=""> </span>Formally, a tax refund requires a physical return of the sum erroneously paid by the taxpayer, while a tax credit involves the application of the reimbursable amount against any sum that may be due and collectible from the taxpayer.<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span>On the practical side, the taxpayer to whom the tax is refunded would have the option, among others, to invest for profit the returned sum, an option not proximately available if the<span style=""> </span>taxpayer chooses instead to receive a tax credit.<span style=""> </span>(<i style="">Commissioner of Customs v. Philippine Phosphate Fertilizer Corporation, </i>G. R. No. 144440, September 1, 2004)<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span><b style=""><o:p></o:p></b></span></p> <p class="MsoNormal" style="text-align: justify;"><b style=""><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span>82.<span style=""> </span>In early April 1999 XYZ Bank advanced the amount of P180 million to the BIR its income tax payment for the bank’s 1999 operations in response for the government’s call to generate more revenues for national development.<span style=""> </span>In separate letters dated April 19 and 29, 1999 and May 14, 1999 XYZ requested for the issuance of a Tax Credit Certificate (TCC) to be utilized against future tax obligations of the bank.<o:p></o:p></span></b></p> <p class="MsoNormal" style="text-align: justify;"><b style=""><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span>By the end of 1999, a credit balance in<span style=""> </span>the amount of P73 million remain which was carried over for the years 2000 to 2004 but was not availed of because XYZ incurred losses during the period.<span style=""> </span>On July 28, 2005 PNB reiterated its request for the issuance of a TCC for the P73<span style=""> </span>million balance.<span style=""> </span>The BIR rejected the request on the ground of among others prescription having been applied for beyond the two-year reglementary period for filing claims for refund as set forth in Sec. 229 of the NIRC of 1997.<o:p></o:p></span></b></p> <p class="MsoNormal" style="text-align: justify;"><b style=""><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span>Has the claim prescribed ?<span style=""> </span>Explain briefly your answer.<o:p></o:p></span></b></p> <p class="MsoNormal" style="text-align: justify;"><b style=""><i style=""><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span></span></i></b><u><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US">SUGGESTED ANSWER</span></u><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US">:<span style=""> </span>The claim has not prescribed.<span style=""> </span>Sec. 229 of the Tax Code, as couched, particularly its statute of limitations component, is in context intended to apply to suits for any national internal revenue tax “alleged to have been erroneously or illegally assessed or collected, or of any penalty claimed to have been collected without authority, or of any sum alleged to have excessively or in any manner wrongfully collected.”<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span>Analyzing the underlying reason behind the advance payment (to help the government) made by XYZ it would be improper<span style=""> </span>to treat the same as erroneous, wrongful or illegal payment of tax within the meaning of Sec. 229 of the NIRC of 1997.<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span>An availment of tax credit due for reasons other than the erroneous or wrongful collection of taxes may have a different prescriptive period. (<i style="">Commissioner of Internal Revenue v. Philippine National Bank, </i>G.R. No. 161997, October 25, 2005 citing <i style="">Commissioner of Internal Revenue v. The Philippine Life Insurance Co., et al</i>. G.R. No. 105208, May 29, 1995)<span style=""> </span>Absent any specific provision in the Tax Code or special laws, that period would be ten (10) years under Article 1144 of the Civil Code.<span style=""> </span>(<i style="">Commissioner of Internal Revenue v. Philippine National Bank, supra</i>)<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><o:p> </o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span><b style="">83.<span style=""> </span>ABC Bank filed with the BIR an application for a tax credit/refund for alleged excess payments of its gross receipts tax (GRT) for the 3<sup>rd</sup> and 4<sup>th</sup> quarters of 2003 and the entire 2004 amounting to P14 million.<span style=""> </span>Since no action was taken by the Commissioner on its claim, ABC filed a case with the CTA on October 18, 2005 to comply with the two-year reglementary period and avoid the prescription of its action.<span style=""> </span>Only July 30, 2007, the CTA rendered a decision denying the claim for ABC’s failure to file its formal offer of evidence in the CTA.<o:p></o:p></b></span></p> <p class="MsoNormal" style="text-align: justify;"><b style=""><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span>ABC Bank now seeks refuge in Onate v. Court of Appeals, 320 Phil. 344; 250 SCRA 283 (1995) where the Supreme Court allowed evidence, not formally offered, to be considered on condition that:<span style=""> </span>(1) evidence must have been identified by testimony duly recorded and (2)<span style=""> </span>it must have been incorporated in the records of the case.<o:p></o:p></span></b></p> <p class="MsoNormal" style="text-align: justify;"><b style=""><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span>Is ABC correct ?<o:p></o:p></span></b></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span><u>SUGGESTED ANSWER:</u><span style=""> </span>No.<span style=""> </span>A tax refund s in the nature of a tax exemption which must be construed <i style="">strictissimi juris</i> against the taxpayer.<span style=""> </span>The taxpayer must present convincing evidence to substantiate a claim for refund.<span style=""> </span>Without any documentary evidenced on record, ABC failed to discharge the burden of proving its right to a tax credit/tax refund.<span style=""> </span>(<i style="">Far East Bank & Trust Company v. Commissioner of Internal Revenue, </i>G. R. No. 149589, September 15, 2006)<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><o:p> </o:p></span></p> <p class="MsoNormal" style="text-align: justify; text-indent: 0.5in;"><b style=""><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US">84. A simultaneous filing of the application with the BIR for refund/credit and the institution of the court suit with the CTA is allowed</span></b><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US">. There is no need to wait for a BIR denial. REASONS:<span style=""> </span><o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify; text-indent: 0.5in;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US">a. <span style=""> </span>The positive requirement of Section 230 NIRC (now Sec. 229, NIRC of 1997); <o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify; text-indent: 0.5in;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span>b.<span style=""> </span>The doctrine that delay of the Commissioner in rendering decision does not extend the peremptory period fixed by the statute; <o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify; text-indent: 0.5in;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US">c.<span style=""> </span>The law fixed the same period two years for filing a claim for refund with the Commissioner under Sec. 204, par. 3, NIRC (now Sec. 204 [C], NIRC of 1997),<span style=""> </span>and for filing suit in court under Sec. 230, NIRC (now Sec. 229, NIRC of 1997), unlike in protests of assessments under Sec. 229<span style=""> </span>(now Sec. 228, NIRC of 1997), which fixed the period (thirty days from receipt of decision) for appealing to the court, thus clearly implying that the prior decision of the Commissioner is necessary to take cognizance of the case.<span style=""> </span><i style="">(Commissioner of Internal Revenue v. Bank of Philippine Islands, etc. et al., CA-G.R. SP No. 34102, September 9, 1994; Gibbs v. Collector of Internal Revenue, et al., 107 Phil, 232; Johnston Lumber Co. v. CTA, 101 Phil. 151)</i><o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify; text-indent: 0.5in;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><o:p> </o:p></span></p> <p class="MsoNormal" style="text-align: justify; text-indent: 0.4in;"><b style=""><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US">85.<span style=""> </span>The grant of a refund is founded on the assumption that the tax return is valid, </span></b><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US">i.e. that the facts stated therein are true and correct.<span style=""> </span>(<i style="">Commissioner of Internal Revenue v. Court of Tax Appeals, </i>G. R. No. 106611, July 21, 1994, 234 SCRA 348) Without the tax return it would be virtually impossible to determine whether the proper taxes have been assessed and paid. After all, it is axiomatic that a claimant has the burden of proof to establish the factual basis of his or her claim for tax credit or refund.<span style=""> </span>Tax refunds, like tax exemptions, are construed strictly against the taxpayer. (<i style="">Paseo Realty & Development Corporation v. Court of Appeals, et al., </i>G. R. No. 119286, October 13, 2004)<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span>However, in <i style="">BPI-Family Savings Bank v. Court of Appeals</i>, 386 Phil. 719; 326 SCRA 641 (2000), refund was granted,<span style=""> </span>despite the failure to present the tax return, because other evidence was presented to prove that the overpaid taxes were not applied.<span style=""> </span>(<i style="">Ibid.</i>)<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><o:p> </o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span><b style="">86.<span style=""> </span>What are the three (3) conditions for the grant of a claim for refund of creditable withholding tax ?<o:p></o:p></b></span></p> <p class="MsoNormal" style="text-align: justify;"><b style=""><i style=""><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span></span></i></b><u><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US">SUGGESTED ANSWER:</span></u><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span><o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span>a.<span style=""> </span>The claim is filed with the Commissioner of Internal Revenue within the two-year period from the date of the payment of the tax.<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span>b.<span style=""> </span>It is shown on the return of the recipient that the income payment received was declared as part of the gross income; and<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span>c.<span style=""> </span>The fact of withholding is established by a copy of a statement duly issued by the payee showing the amount paid and the amount of tax withheld therefrom.<span style=""> </span>(<i style="">Banco Filipino Savings and Mortgage Bank v. Court of Appeals, et al., </i>G. R. No. 155682, March 27, 2007)<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span><o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span><b style="">87.<span style=""> </span>What should be established by a taxpayer for the grant of<span style=""> </span>a tax refund ?<span style=""> </span>Why ?<o:p></o:p></b></span></p> <p class="MsoNormal" style="text-align: justify;"><b style=""><i style=""><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span></span></i></b><u><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US">SUGGESTED ANSWER:</span></u><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span>A taxpayer needs<span style=""> </span>to establish not only that the refund is justified under the law, but also the correct amount that should be refunded.<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span>If the latter requisite cannot be ascertained with particularity, there is cause to deny the refund, or allow it only to the extent of the sum that is actually proven as due.<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span>Tax refunds partake of the nature of tax exemptions and are thus construed <i style="">strictissimi juris </i>against the person claiming the exemption.<span style=""> </span>The burden in proving the claim for refund necessarily falls on the taxpayer.<span style=""> </span>(<i style="">Far East Bank Trust and Company, etc., v. Commissioner of Internal Revenue, et al., </i>G. R. No. 138919, May 2, 2006)<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><o:p> </o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span><b style="">88.<span style=""> </span>What are the requisites for the refund of illegally deducted taxes from the income of an employees’ trust fund ?<o:p></o:p></b></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span><u>SUGGESTED ANSWER:</u><span style=""> </span>What has to be established, as a matter of evidence, is that the amount sought to be refunded to the bank-trustee corresponds to the tax withheld on the interest income earned from the exempt employees’ trust.<span style=""> </span>The need to be determinate is important, specially if the bank trustee, in the ordinary course of its banking<b style=""><i style=""> </i></b>business, earns interest income not only from its investments of employees’ trusts, but on a whole range of accounts which do not enjoy the same broad exemption as employees’ trusts.<span style=""> </span>(<i style="">Far East Bank Trust and Company, etc., v. Commissioner of Internal Revenue, et al., </i>G. R. No. 138919, May 2, 2006)<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span><o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span></span><b style=""><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">89.<span style=""> </span>A bank-trustee of employee trusts filed an application for the refund of taxes withheld on the interest incomes of the investments made of the funds of the employees’ trusts.<span style=""> </span>Instead of presenting separate accounts for interest incomes made of these investments, the bank-trustee instead presented witness to establish that it would next to impossible to single out the specific transactions involving the employees’ trust funds from the totality of all interest income from its total investments.<span style=""> </span>On the above basis will the application for refund prosper ?<o:p></o:p></span></b></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span><u>SUGGESTED ANSWER</u>:<span style=""> </span>No.<span style=""> </span>The application for refund will not prosper.<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>The bank-trustee needs to establish not only that the refund is justified under the law (which is so because incomes of employees’ trusts are tax exempt), but also the correct amount that should be refunded. <o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>Tax refunds partake of the nature of tax exemptions and are thus construed <i style="">strictissimi juris </i>against the person or entity claiming the exemption.<span style=""> </span>The burden in proving the amount to be refunded necessarily falls on the bank-trustee, and there is an apparent failure to do so. <o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>A necessary consequence of the special exemption enjoyed alone by employees’ trusts would be a necessary segregation in the accounting of such income, interest or otherwise, earned from those trusts from that earned by the other clients of the bank-trustee.<span style=""> </span>(<i style="">Far East Bank and Trust Company, etc., v. Commissioner, etc., et al., </i>G.R. No. 138919, May 2, 2006)<span style=""> </span>The amounts that are the exempt earnings of the employee’s trust has not been shown as they have been commingled with the interest income of the other clients of the bank-trustee.<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><o:p> </o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span><b style="">90.<span style=""> </span>CTA Circular No. 1-95 clearly requires that photocopies of the receipts or invoices must be pre-marked and submitted to the CTA to verify the correctness of the summary listing and the CPA certification</b>. CTA Circular No. 1-95, issued on 25 January 1995,<span style=""> </span>reads: <o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>“1. <span style=""> </span>The party who desires to introduce as evidence such voluminous documents must present: (a) Summary containing the total amount/s of the tax account or tax paid for the period involved and a chronological or numerical list of the numbers, dates and amounts covered by the invoices or receipts; and (b) a Certification of an independent Certified Public Accountant attesting to the correctness of the contents of the summary after making an examination and evaluation of the voluminous receipts and invoices. Such summary and certification must properly be identified by a competent witness from the accounting firm.<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>2. The method of individual presentation of each and every receipt or invoice or other documents for marking, identification and comparison with the originals thereof need not be done before the Court or the Commissioner anymore after the introduction of the summary and CPA certification. It is enough that <b><u>the receipts, invoices and other documents covering the said accounts or payments must be pre-marked by the party concerned and submitted to the Court</u> in order to be made accessible to the adverse party whenever he/she desires to check and verify the correctness of the summary and CPA certification.</b> However, the originals of the said receipts, invoices or documents should be ready for verification and comparison in case doubt on the authenticity of the particular documents presented is raised during the hearing of the case.” (Emphasis supplied)<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><o:p> </o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span><b>91.<span style=""> </span>Manila Electric Company a grantee of a legislative franchise under Act No. 484, as amended by Republic Act No. 4159 and Presidential Decree No. 551, had been paying a 2% franchise tax based on its gross receipts, in lieu of all other taxes and assessments of whatever nature.<span style=""> </span>Upon the effectivity of Executive Order No. 72 on February 10, 1987, however, respondent became subject to the payment of regular corporate income tax.<o:p></o:p></b></span></p> <p class="MsoNormal" style="text-align: justify;"><b><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>For the last quarter ending December 31, 1987, respondent filed on April 15, 1988 its tentative income tax reflecting a refundable amount of <s>P</s>101,897,741, but only <s>P</s>77,931,812 was applied as tax credit for the succeeding taxable year 1988.<o:p></o:p></span></b></p> <p class="MsoNormal" style="text-align: justify; text-indent: 0.5in;"><b><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">Acting on a yearly routinary Letter of Authority No. 0018064 NA dated June 27, 1988 issued by petitioner, directing the investigation of tax liabilities of respondent for taxable year 1987, an investigation was conducted by Revenue Officer Frederick Capitan which showed that respondent was liable for “1. deficiency income tax in the amount of <s>P</s>2,340,902.52; and 2. deficiency franchise tax in the amount of <s>P</s>2,838,335.84.”<o:p></o:p></span></b></p> <p class="MsoNormal" style="text-align: justify;"><b><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span><span style=""> </span>On April 17, 1989, respondent filed an amended final corporate Income Tax Return ending December 31, 1988 reflecting a refundable amount of <s>P</s>107,649,729.<o:p></o:p></span></b></p> <p class="MsoNormal" style="text-align: justify;"><b><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>Respondent thus filed on March 30, 1990 a letter-claim for refund or credit in the amount of <s>P</s>107,649,729 representing overpaid income taxes for the years 1987 and 1988.<o:p></o:p></span></b></p> <p class="MsoNormal" style="text-align: justify; text-indent: 0.5in;"><b><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">Petitioner not having acted on its request, respondent filed on April 6, 1990 a judicial claim for refund or credit with the Court of Tax Appeals.<o:p></o:p></span></b></p> <p class="MsoNormal" style="text-align: justify;"><b><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>It is gathered that respondent paid the deficiency <u>franchise</u> tax in the amount of <s>P</s>2,838,335.84.<span style=""> </span>It protested the payment of the alleged deficiency <u>income</u> tax and claimed as an alternative remedy the deduction thereof from its claim for refund or credit.<o:p></o:p></span></b></p> <p class="MsoNormal" style="text-align: justify;"><b><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>The Court of Tax Appeals granted the P107,649,729 claim for refund, or in the alternative for the BIR to issue a tax credit.<span style=""> </span>Is the Court of Tax Appeals correct ?<o:p></o:p></span></b></p> <p class="MsoNormal" style="text-align: justify;"><b><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span></span></b><u><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">SUGGESTED ANSWER:</span></u><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>Yes. Section 69 of the National Internal Revenue Code of 1986, now Sec. 76 provides, <span style=""> </span>if the sum of the quarterly tax payments made during a taxable year is not equal to the total tax due on the entire taxable income of that year as shown in its final adjustment return, the corporation has the option to either:<span style=""> </span>(a) pay the excess tax still due, or (b) be refunded the excess amount paid.<span style=""> </span>The returns submitted are “merely pre-audited which consist mainly of checking mathematical accuracy of the figures in the return.” After such checking, the purpose of which being to “insure prompt action on corporate annual income tax returns showing refundable amounts arising from overpaid quarterly income taxes,” (Revenue Memorandum Order No. 32-76 dated June 11, 1976) the refund or tax credit is granted.<span style=""> </span>(</span><i style=""><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">Commissioner of Internal Revenue v. Manila Electric Company,<b style=""> </b></span></i><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">G. R. No. 121666, October 10, 2007)<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-family: Arial;" lang="EN-US"><o:p> </o:p></span></p> <p class="MsoNormal" style="text-align: center;" align="center"><b style=""><u><span style="font-size: 14pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US">LOCAL GOVERNMENT CODE ON TAXATION<o:p></o:p></span></u></b></p> <p class="MsoNormal" style="text-align: center;" align="center"><b style=""><u><span style="font-size: 12pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><o:p><span style="text-decoration: none;"> </span></o:p></span></u></b></p> <p class="MsoNormal" style="text-align: center;" align="center"><b style=""><u><span style="font-size: 12pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US">LOCAL TAXATION<o:p></o:p></span></u></b></p> <p class="MsoNormal" style=""><span style="font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><o:p> </o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 11pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span><b style=""><span style=""> </span></b></span><b style=""><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US">1.<span style=""> </span>The Local Government Code prohibits local government units from collecting excise taxes on articles enumerated under the NIRC, and taxes, fees or charges on petroleum products.</span></b><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"> (Sec. 133 [h], Local Government Code in relation to the Tax Code). <o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><o:p> </o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span><b style="">2.<span style=""> </span></b></span><b style=""><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">Petron maintains a depot or bulk plant at the Navotas Fishport Complex in Navotas. Through that depot, it has engaged in the selling of diesel fuels to vessels used in commercial fishing in and around<span style=""> </span></span></b><st1:place><st1:placename><b style=""><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">Manila</span></b></st1:placename><b style=""><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"> </span></b><st1:placetype><b style=""><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">Bay</span></b></st1:placetype></st1:place><b style=""><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">.<span style=""> </span>On </span></b><st1:date month="3" day="1" year="2002"><b style=""><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">1 March 2002</span></b></st1:date><b style=""><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">, Petron received a letter from the office of Navotas Mayor, Toby Tiangco, wherein the corporation was assessed taxes “relative to the figures covering sale of diesel declared by your Navotas Terminal from 1997 to 2001.” The stated total amount due was <s>P</s>6,259,087.62, a figure derived from the gross sales of the depot during the years in question. The computation sheets that were attached to the letter made reference to Ordinance 92-03, or the New Navotas Revenue Code (Navotas Revenue Code).<span style="letter-spacing: -0.1pt;"><o:p></o:p></span></span></b></p> <p class="MsoNormal" style="text-align: justify;"><b style=""><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>Is a local government unit, like Navotas,<span style=""> </span>empowered under the Local Government Code (the LGC) to impose business taxes on persons or entities engaged in the sale of petroleum products ? <o:p></o:p></span></b></p> <p class="MsoNormal" style="text-align: justify; text-indent: 0.5in;"><u><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">SUGGESTED ANSWER:</span></u><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>No. While the Local Government Code does not generally bar the imposition of business taxes on articles burdened by excise taxes under the NIRC, it specifically prohibits local government units from extending the levy of any kind of “taxes, fees or charges on petroleum products.”<span style=""> </span>The plain letter of the law is an explicit disinclination on the part of the legislature to impart that particular taxing power to local government units.<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>The Supreme Court defers to the other branches of government in the formulation of oil policy, but when the choices are made through legislation, the Court expects that the choices are deliberate, considering that the stakes are virtually all-in. Navotas may be bolstered by the constitutional and statutory policy favoring local fiscal autonomy, but it would be utter indolence to reflexively affirm such policy when the inevitable effect is an increase in oil prices. Any prudent adjudication should fully ascertain the mandate of local government units to impose taxes on petroleum products, and such mandate should be cast in so specific terms as to leave no dispute as to the legislative intendment to extend such power in the name of local autonomy.<span style=""> </span><span style="letter-spacing: -0.1pt;">(<i style="">Petron Corporation v. Tiangco, et al., </i>G. R. No. 158881, </span></span><st1:date month="4" day="16" year="2008"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US">April 16, 2008</span></st1:date><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US">)<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><o:p> </o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span><b style="">3.<span style=""> </span>The primary reason for the withdrawal of tax exemption privileges granted to government owned and controlled corporations</b> and all other units of government was that such privilege resulted to serious tax base erosion and distortions in the tax treatment of similarly situated enterprises, hence resulting in the need for these entities to share in the requirements of development, fiscal or otherwise, by paying the taxes and other charges due them. (<i style="">Philippine Ports Authority v.<span style=""> </span>City of </i></span><st1:city><st1:place><i style=""><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US">Iloilo</span></i></st1:place></st1:city><i style=""><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US">, </span></i><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US">G. R. No. 109791, </span><st1:date month="7" day="14" year="2003"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US">July 14, 2003</span></st1:date><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US">)<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><o:p> </o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span><b style="">4.<span style=""> </span>National Power Corporation (NPC) is of the insistence that it is not subject to the payment of franchises taxes imposed by the </b></span><st1:place><st1:placetype><b style=""><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US">Province</span></b></st1:placetype><b style=""><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"> of </span></b><st1:placename><b style=""><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US">Isabela</span></b></st1:placename></st1:place><b style=""><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"> because all of its shares are owned by the Republic of the </span></b><st1:country-region><st1:place><b style=""><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US">Philippines</span></b></st1:place></st1:country-region><b style=""><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US">.<span style=""> </span>It is thus, an instrumentality of the National Government which is exempt from local taxation. As such it is not a private corporation engaged in “business enjoying franchise”<o:p></o:p></span></b></p> <p class="MsoNormal" style="text-align: justify;"><b style=""><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span>Is such contention meritorious ?<o:p></o:p></span></b></p> <p class="MsoNormal" style="text-align: justify;"><b style=""><i style=""><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span></span></i></b><u><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US">SUGGESTED ANSWER:</span></u><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span>No.<span style=""> </span><b style=""><i style=""><span style=""> </span></i></b><i style="">Philippine Long Distance Telephone Company, Inc., v. City of Davao, et al., etc</i>., G. R. No. 143867, August 22, 2001,<i style=""> </i><span style=""> </span>upheld the authority of the City of Davao, a local government unit, to impose and collect a local franchise tax because the Local Government Code has withdrawn all tax exemptions previously enjoyed by all persons and authorized local government units to impose a tax on business enjoying a franchise tax notwithstanding the grant of tax exemption to them.<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><i style=""><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><o:p> </o:p></span></i></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span><b style="">5.<span style=""> </span>X City issued a notice of assessment against ABC Condominium Corporation for unpaid business taxes.<span style=""> </span>The Condominium Corporation is a duly constituted condominium corporation in accordance with the Condominium Act which owns and holds title to the common and limited common areas of the condominium.<span style=""> </span>Its membership comprises the unit owners and is authorized under its By-Laws to collect regular assessments from its members for operating expenses, capital expenditures on the common areas and other special assessments as provided for in the Master Deed with ?Declaration of Restrictions of the Condominium.<o:p></o:p></b></span></p> <p class="MsoNormal" style="text-align: justify;"><b style=""><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span>ABC Condominium Corporation insists that the X City Revenue Code and the Local Government Code do not contain provisions upon which the assessment could be based.<span style=""> </span>Resolve the controversy.<o:p></o:p></span></b></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span><u>SUGGESTED ANSWER</u>:<span style=""> </span>ABC is correct.<span style=""> </span>Condominium corporations are generally exempt from local business taxation under the Local Government Code, irrespective of any local ordinance that seeks to declare otherwise.<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span>X City, is authorized under the Local Government Code, to impose a tax on business, which is defined under the Code as ”trade or commercial activity regularly engaged in as a means of livelihood or with a view to profit.”<span style=""> </span>By its very nature a condominium corporation is not engaged in business, and any profit that it derives is merely incidental, hence it may not be subject to business taxes.<span style=""> </span>(<i style="">Yamane , etc. v. BA Lepanto Condominium Corporation, </i>G. R. No. 154993, October 25, 2005)<o:p></o:p></span></p> <p class="MsoBodyText" style="margin-bottom: 0.0001pt; text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><o:p> </o:p></span></p> <p class="MsoBodyText" style="margin-bottom: 0.0001pt; text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span><b style="">6.<span style=""> </span>On 17 August 2000, City of Manila, Tax Ordinance No. 7988 was declared null and void and of no effect by the Secretary of Justice. For failure of the City to move for reconsideration the decision lapsed into finality. On </b></span><st1:date month="2" day="22" year="2001"><b style=""><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US">22 February 2001</span></b></st1:date><b style=""><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US">, the City enacted Tax Ordinance No. 8011 which amended certain provisions of Tax Ordinance No. 7988.<span style=""> </span>May Tax Ordinance No. 8011 be enforced ?<o:p></o:p></span></b></p> <p class="MsoBodyText" style="margin-bottom: 0.0001pt; text-align: justify;"><b style=""><i style=""><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span></span></i></b><u><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US">SUGGESTED ANSWER:</span></u><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span>No.<span style=""> </span>If an order or law such as Tax Ordinance No. 7988 is invalid, then it does not legally exist, there should be no occasion or need to amend it.<span style=""> </span>[<i style="">Coca-Cola Bottlers Philippines, Inc. v. City of Manila, et al., </i>G. R. No. 156252, June 27, 2006 citing <i style="">People v. Lim, </i>108 Phil. 1091 (1960)], hence Tax Ordinance No. 8011 is also invalid and cannot be enforced.<o:p></o:p></span></p> <p class="MsoBodyText" style="margin-bottom: 0.0001pt; text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><o:p> </o:p></span></p> <p class="MsoBodyText" style="margin-bottom: 0.0001pt; text-align: justify; text-indent: 0.25in;"><b style=""><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">7.<span style=""> </span><span style=""> </span> Professional tax may be imposed by a province or city but not by a municipality or barangay.<o:p></o:p></span></b></p> <p class="MsoBodyText" style="margin-bottom: 0.0001pt; text-align: justify; text-indent: 0.25in;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>a.<span style=""> </span>Transaction taxed: Exercise or practice of profession requiring government licensure examination.<b style=""><o:p></o:p></b></span></p> <p class="MsoBodyText" style="margin-bottom: 0.0001pt; text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>b.<span style=""> </span>Tax rate: Not be exceed P300.00.<o:p></o:p></span></p> <p class="MsoBodyText" style="margin-bottom: 0.0001pt; text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>c.<span style=""> </span>Tax base: Reasonable classification by the sanggunian.<o:p></o:p></span></p> <p class="MsoBodyText" style="margin-bottom: 0.0001pt; text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>d.<span style=""> </span>Exception:<span style=""> </span>Payment to one province or city no longer subject to any other national or local tax, license or fee for the practice of such profession in any part of the Philippine professionals exclusively employed in the government.<o:p></o:p></span></p> <p class="MsoBodyText" style="margin-bottom: 0.0001pt; text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>e.<span style=""> </span>Date of payment:<span style=""> </span>or on before January 31 or engaging in the profession.<span style=""> </span><o:p></o:p></span></p> <p class="MsoBodyText" style="margin-bottom: 0.0001pt; text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>f.<span style=""> </span>Place of payment:<span style=""> </span>Province or city where the professional practices his profession or where he maintains his principal office in case he practices his profession in several places.<span style=""> </span><o:p></o:p></span></p> <p class="MsoBodyText" style="margin-bottom: 0.0001pt; text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><o:p> </o:p></span></p> <p class="MsoBodyText" style="margin-bottom: 0.0001pt; text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span><b style="">8.<span style=""> </span>Requirements:<span style=""> </span></b>Any individual or corporation employing a person subject to professional tax shall require payment by that person of the tax on his profession before employment and annually thereafter.<o:p></o:p></span></p> <p class="MsoBodyText" style="margin-bottom: 0.0001pt; text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>Any person subject to the professional tax shall write in deeds, receipts, prescriptions, reports, books of account, plans and designs, surveys and maps, as the case may be, the number of the official receipt issued to him. <o:p></o:p></span></p> <p class="MsoBodyText" style="margin-bottom: 0.0001pt;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>f.<span style=""> </span>Exemption:<span style=""> </span>Professionals exclusively employed in the government shall be exempt from payment.<span style=""> </span>(Sec. 139, LGC)<o:p></o:p></span></p> <p class="MsoBodyText" style="margin-bottom: 0.0001pt;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><o:p> </o:p></span></p> <p class="MsoBodyText" style="margin-bottom: 0.0001pt; text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span><b style="">9.</b><span style=""> </span><span style=""> </span><b style="">Professionals who are subject to professional tax, defined.</b><span style=""> </span>The professionals subject to the professional tax are only those<span style=""> </span>who have passed the bar examinations, or any board or other examinations conducted by the Professional Regulation Commission (PRC).<span style=""> </span>for example, a lawyer who is also a Certified Public Accountant (CPA) must pay the professional tax imposed on lawyers and that fixed for CPAs, if he is to practice both professions.<span style=""> </span>[Sec. 238 (f), Rule XXX, Rules and Regulations Implementing the Local Government Code of 1991]<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><o:p> </o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span><b style="">10.<span style=""> </span>Overview of the power of a local government unit to impose business taxes.</b><span style=""> </span>The power of local government units to impose taxes within its territorial jurisdiction derives from the Constitution itself, which recognizes the power of these units “to create its own sources of revenue and to levy taxes, fees and charges subject to such guidelines and limitations as the Congress may provide consistent with the basic policy of local autonomy.<span style=""> </span>(<i style="">Yamane , etc. v. BA Lepanto Condominium Corporation, </i>G. R. No. 154993, </span><st1:date month="10" day="25" year="2005"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">October 25, 2005</span></st1:date><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"> citing Sec. 5, Article X, Constitution)<o:p></o:p></span></p> <p class="MsoBodyText" style="margin-bottom: 0.0001pt; text-align: justify;"><b style=""><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span></span></b><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">These guidelines and limitations as provided by Congress are in main contained in the Local Government Code of 1991 which provides for comprehensive instances when and how local government units may impose taxes.<span style=""> </span>The significant limitations are enumerated primarily in Section 133 of the Code, which includes among others, a prohibition on the imposition of income taxes except when levied on banks and other financial institutions.<o:p></o:p></span></p> <p class="MsoBodyText" style="margin-bottom: 0.0001pt; text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>The most well-known mode of local government taxation is perhaps the real property tax.<span style=""> </span>The Code specifically enumerates several types of business on which municipalities and cities may impose taxes.<span style=""> </span>Moreover, the local <i style="">sanggunian </i>is also authorized to impose taxes on any other businesses not otherwise specified under the Code which the <i style="">sanggunian </i>concerned may deem proper to tax.<span style=""> </span>(<i style="">Ibid.</i>)<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><o:p> </o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span><b style="">11.<span style=""> </span><i style="">X City issued a notice of assessment against ABC Condominium Corporation for unpaid business taxes.<span style=""> </span>The Condominium Corporation is a duly constituted condominium corporation in accordance with the Condominium Act which owns and holds title to the common and limited common areas of the condominium.<span style=""> </span>Its membership comprises the unit owners and is authorized under its By-Laws to collect regular assessments from its members for operating expenses, capital expenditures on the common areas and other special assessments as provided for in the Master Deed with ?Declaration of Restrictions of the Condominium.<o:p></o:p></i></b></span></p> <p class="MsoNormal" style="text-align: justify;"><b style=""><i style=""><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>ABC Condominium Corporation insists that the X City Revenue Code and the Local Government Code do not contain provisions upon which the assessment could be based.<span style=""> </span>Resolve the controversy.<o:p></o:p></span></i></b></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>ANSWER:<span style=""> </span>ABC is correct.<span style=""> </span>Condominium corporations are generally exempt from local business taxation under the Local Government Code, irrespective of any local ordinance that seeks to declare otherwise.<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>X City, is authorized under the Local Government Code, to impose a tax on business, which is defined under the Code as ”trade or commercial activity regularly engaged in as a means of livelihood or with a view to profit.”<span style=""> </span>By its very nature a condominium corporation is not engaged in business, and any profit that it derives is merely incidental, hence it may not be subject to business taxes.<span style=""> </span>(<i style="">Yamane , etc. v. BA Lepanto Condominium Corporation, </i>G. R. No. 154993, October 25, 2005)<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><o:p> </o:p></span></p> <p class="MsoBodyText" style="margin-bottom: 0.0001pt; text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span><b style="">12.<span style=""> </span>Situs of municipal taxation where there is no branch, sales office or warehouse.</b> For purposes of collecting business taxes, manufacturers, assemblers, repackers, brewers, distillers, rectifiers and compounders of liquor, distilled spirits and wines, millers, producers, exporters, wholesalers, distributors, dealers, contractors, banks and other financial institutions, and other business shall report In cases where there is no such branch, sales office, or warehouse in the locality where the sale is made, <b style="">the sale shall be recorded in the principal office along with the sales made by said principal office and the tax shall accrue to the city or municipality where said principal office is located. </b><span style=""> </span>[Sec. 150 (a), LGC; Art. 243 (b) (2),Rules and Regulations Implementing the Local Government Code of 1991]<o:p></o:p></span></p> <p class="MsoBodyText" style="margin-bottom: 0.0001pt; text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><o:p> </o:p></span></p> <p class="MsoBodyText" style="margin-bottom: 0.0001pt; text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span><b style="">13.<span style=""> </span>Situs of municipal taxation where there is a factory, project office, plant or plantation in pursuit of business</b>.<span style=""> </span>The following sales allocation shall apply to manufacturers, assemblers, contractors, producers, and exporters with a factory, project office, plant or plantation in pursuit of a business,<o:p></o:p></span></p> <p class="MsoBodyText" style="margin-bottom: 0.0001pt; text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span><span style=""> </span>a.<span style=""> </span><span style=""> </span><b style="">thirty percent (30%) </b>of all sales recorded in the principal office shall be taxable by the city or municipality where the principal office is located, and<o:p></o:p></span></p> <p class="MsoBodyText" style="margin-bottom: 0.0001pt; text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span><span style=""> </span>b.<span style=""> </span><span style=""> </span><b style="">seventy percent (70%)</b> of all sales recorded in the principal office shall be taxable by the city or municipality where the factory, project office, plant or plantation is located.<o:p></o:p></span></p> <p class="MsoBodyText" style="margin-bottom: 0.0001pt; text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>LGUs where only experimental farms are located shall not be entitled to the above sales allocation.<span style=""> </span>[Sec. 150 (a), LGC; Art. 243 (b) (3),Rules and Regulations Implementing the Local Government Code of 1991, numbering and arrangement supplied]<o:p></o:p></span></p> <p class="MsoBodyText" style="margin-bottom: 0.0001pt; text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>On-site sales of commercial quantity made by experimental farms shall be similarly imposed the corresponding tax and allocated as shown above.<span style=""> </span>[2<sup>nd</sup> par., Art. 243 (a) (5), <i style="">Ibid.</i>]<o:p></o:p></span></p> <p class="MsoBodyText" style="margin-bottom: 0.0001pt; text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><o:p> </o:p></span></p> <p class="MsoBodyText" style="margin-bottom: 0.0001pt; text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span><b style="">14.<span style=""> </span>Situs of municipal taxation where the sales are made by route trucks, vans, or vehicles.<span style=""> </span><o:p></o:p></b></span></p> <p class="MsoBodyText" style="margin-bottom: 0.0001pt; text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span><span style=""> </span>a. <span style=""> </span>For route sales made in a locality where a manufacturer, producer, wholesaler, retailer or dealer has a branch or sales office or warehouse, the sales are recorded in the branch, sales office or warehouse and the tax due thereon is paid to the LGU where such branch, sales office or warehouse is located.<span style=""> </span>[Art. 243 (d) (1),<span style=""> </span>Rules and Regulations Implementing the Local Government Code of 1991]<o:p></o:p></span></p> <p class="MsoBodyText" style="margin-bottom: 0.0001pt; text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span><span style=""> </span>b.<span style=""> </span><span style=""> </span>For route sales made<span style=""> </span>in a locality where a manufacturer, producer, wholesaler, retailer or dealer has no branch, sales office or warehouse, the sales are recorded in the branch, sales office or warehouse from where the route trucks withdraw their products for sale, and the tax due on such sale is paid to the LGU where such branch, sales office or warehouse is located.<span style=""> </span>[Art. 243 (d) (2), <i style="">Ibid.</i>] <o:p></o:p></span></p> <p class="MsoBodyText" style="margin-bottom: 0.0001pt; text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span><span style=""> </span>c.<span style=""> </span>The LGUs where the route trucks, mentioned above, deliver merchandise cannot impose any tax on said trucks except the annual fixed tax authorized to be imposed by the province or city on every delivery truck or van or any motor vehicle used by manufacturers, producers, wholesalers, dealers, or retailers in the delivery and distribution of distilled spirits, fermented liquors, softdrinks, cigars and<span style=""> </span>cigarettes, and other products as may be determined by the <i style="">sangguniang panlalawigan, </i>or <i style="">panlungsod.<span style=""> </span></i>[Art. 243 (d) (3), <i style="">Ibid.</i>]<o:p></o:p></span></p> <p class="MsoBodyText" style="margin-bottom: 0.0001pt; text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span><span style=""> </span>d.<span style=""> </span><span style=""> </span>In addition to the annual fixed tax, cities may also collect from the same manufacturers, producers, wholesalers, retailers, and dealers using route trucks a mayor’s permit fee which shall be imposed in a local tax ordinance.<span style=""> </span>[Art. 243 (d) (4), <i style="">Ibid.</i>]<o:p></o:p></span></p> <p class="MsoBodyText" style="margin-bottom: 0.0001pt;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><o:p> </o:p></span></p> <p class="MsoBodyText" style="margin-bottom: 0.0001pt; text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span><b style="">15.<span style=""> </span>Illustrations of situs of taxation.<o:p></o:p></b></span></p> <p class="MsoBodyText" style="margin-bottom: 0.0001pt; text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>a.<span style=""> </span>MI is a corporation engaged in the trading of books.<span style=""> </span>It holds office in </span><st1:place><st1:placename><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">Pasig</span></st1:placename><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"> </span><st1:placetype><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">City</span></st1:placetype></st1:place><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">, where all transactions are made including the issuance of sales invoices.<span style=""> </span>However, it also maintains a warehouse in </span><st1:place><st1:placename><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">Mandaluyong</span></st1:placename><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"> </span><st1:placetype><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">City</span></st1:placetype></st1:place><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"> which serves as its storage area and no transactions are made therein.<o:p></o:p></span></p> <p class="MsoBodyText" style="margin-bottom: 0.0001pt; text-align: justify; text-indent: 0.25in;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>MI should be assessed at the gross sales or receipts of the preceding year by </span><st1:place><st1:placename><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">Pasig</span></st1:placename><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"> </span><st1:placetype><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">City</span></st1:placetype></st1:place><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">.<span style=""> </span>Likewise, it may also collect the mayor’s permit and other regulatory fees.<o:p></o:p></span></p> <p class="MsoBodyText" style="margin-bottom: 0.0001pt; text-align: justify; text-indent: 0.25in;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>Mandaluyong City where the warehouse is located but where no transactions are made, may only collect the Mayor’s permit fee and other regulatory fees provided for under its existing local tax ordinances.<span style=""> </span><i style="">(DOF March 29, 1993 letter to Megastrat, Inc.)<o:p></o:p></i></span></p> <p class="MsoBodyText" style="margin-bottom: 0.0001pt; text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>b.<span style=""> </span>MC is a subsidiary of SMC.<span style=""> </span>It is a manufacturer with a principal office in </span><st1:place><st1:placename><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">Pasig</span></st1:placename><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"> </span><st1:placetype><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">City</span></st1:placetype></st1:place><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"> maintained for management and administrative purposes.<span style=""> </span>It has a factory and sales office in </span><st1:city><st1:place><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">Quezon City</span></st1:place></st1:city><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">, where said route trucks withdraw their products for delivery to the customers in </span><st1:place><st1:placename><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">Pasig</span></st1:placename><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"> </span><st1:placetype><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">City</span></st1:placetype></st1:place><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">.<span style=""> </span><o:p></o:p></span></p> <p class="MsoBodyText" style="margin-bottom: 0.0001pt; text-align: justify; text-indent: 0.25in;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">MC should pay business taxes to </span><st1:city><st1:place><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">Quezon City</span></st1:place></st1:city><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"> and not to </span><st1:place><st1:placename><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">Pasig</span></st1:placename><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"> </span><st1:placetype><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">City</span></st1:placetype></st1:place><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">.<span style=""> </span>However, </span><st1:city><st1:place><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">Pasig</span></st1:place></st1:city><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"> may levy and collect the annual fixed tax for every delivery truck or van of MC delivering goods within </span><st1:city><st1:place><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">Pasig</span></st1:place></st1:city><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">.<span style=""> </span>The IRR of the LGC of 1991 provides in Article 243 (2), “For route sales made in a locality where a manufacturer, producer, wholesaler, retailer or dealer has no branch, sales office or warehouse, the sales are recorded in the branch, sales office or warehouse from where the route trucks withdraw their products for sale, and the tax due on such sales is paid to the LGU where such branch, sales office or warehouse is located.”<span style=""> </span><i style="">(DOF February 26, 1993 letter to San Miguel Corporation)</i> <o:p></o:p></span></p> <p class="MsoBodyText" style="margin-bottom: 0.0001pt; text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>c.<span style=""> </span><span style=""> </span>The place of delivery of the subject of the contract, and not the place where the contract was perfected determines the situs of taxation.<span style=""> </span>(<i style="">Shell Co., Inc. v. </i></span><st1:place><st1:placetype><i style=""><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">Municipality</span></i></st1:placetype><i style=""><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"> of </span></i><st1:placename><i style=""><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">Sipocot</span></i></st1:placename></st1:place><i style=""><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">, Camarines Sur, </span></i><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">105 Phil. 1263)<i style=""><span style=""> </span></i>This is the place where the sale was consummated through delivery.<o:p></o:p></span></p> <p class="MsoBodyText" style="margin-bottom: 0.0001pt; text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>d.<span style=""> </span><span style=""> </span>Matches purchased by customers outside of </span><st1:place><st1:placename><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">Cebu</span></st1:placename><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"> </span><st1:placetype><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">City</span></st1:placetype></st1:place><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"> but booked, paid for and delivered to carriers in </span><st1:place><st1:placename><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">Cebu</span></st1:placename><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"> </span><st1:placetype><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">City</span></st1:placetype></st1:place><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"> are taxable by </span><st1:place><st1:placename><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">Cebu</span></st1:placename><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"> </span><st1:placetype><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">City</span></st1:placetype></st1:place><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">.<span style=""> </span>Delivery to the carrier is delivery to the buyer.<span style=""> </span>(<i style="">Philippine Match Co., Ltd. v. City of Cebu, et al.,</i> L-30745, January 18, 1978]<o:p></o:p></span></p> <p class="MsoBodyText" style="margin-bottom: 0.0001pt; text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><o:p> </o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><b style=""><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span>16.<span style=""> </span>What is the jurisdiction of the Secretary of Justice regarding issues of validity of tax ordinances ?<o:p></o:p></span></b></p> <p class="MsoNormal" style="text-align: justify;"><b style=""><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span></span></b><u><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US">SUGGESTED ANSWER:</span></u><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span><b style="">Secretary of Justice can take cognizance of a case involving the constitutionality or legality of tax ordinances where there are factual issues involved.</b> <i style="">(Figuerres v. Court of Appeals, et al</i>., G.R. No. 119172, March 25, 1999)<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span><b style="">Taxpayer files appeal to the Secretary of Justice, within 30 days from effectivity thereof.</b><span style=""> </span>In case the Secretary decides the appeal, a period also of 30 days is allowed for an aggrieved party to go to court.<span style=""> </span>But if the Secretary does not act thereon, after the lapse of 60 days, a party could already seek relief in court within 30 days from the lapse of the 60 day period.<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span>These three separate periods are clearly given for compliance as a prerequisite before seeking redress in a competent court.<span style=""> </span>Such statutory periods are set to prevent delays as well as enhance the orderly and speedy discharge of judicial functions.<span style=""> </span>For this reason the courts construe these provisions of statutes as mandatory.<span style=""> </span><i style="">(Reyes, et al., v. Court of Appeals, et al</i>.,<span style=""> </span>G.R. No. 118233, December 10, 1999)<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><i style=""><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><o:p> </o:p></span></i></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span><b style="">17.<span style=""> </span><span style=""> </span>Public hearings are mandatory prior to approval of tax ordinance</b>,<span style=""> </span>but this still requires the taxpayer to adduce evidence to show that no public hearings ever took place. <i style="">(Reyes, et al., v. Court of Appeals, et al.,<span style=""> </span></i>G.R. No. 118233, December 10, 1999)<span style=""> </span>Public hearings are required to be conducted prior to the enactment of an ordinance imposing real property taxes. (<i style="">Figuerres v. Court of Appeals, et al., </i>G.R. No. 119172, March 25, 1999)<o:p></o:p></span></p> <p class="MsoBodyText" style="margin-bottom: 0.0001pt; text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><o:p> </o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><b style=""><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>18.<span style=""> </span>When is payment under protest not required when impugning the validity of a tax ordinance ?<span style=""> </span>Explain.<o:p></o:p></span></b></p> <p class="MsoNormal" style="text-align: justify;"><b style=""><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span></span></b><u><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">SUGGESTED ANSWER:</span></u><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>If the ground for the protest is validity of the real property tax ordinance<b style=""> </b>and not the unreasonableness of the amount collected the tax must be paid under protest, and the issue of legality may be raised to the proper courts on certiorari without need of exhausting administrative remedies.<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><o:p> </o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><b style=""><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>19.<span style=""> </span>When is payment under protest required when impugning the validity of a tax ordinance ?<span style=""> </span>If the ground for the protest is unreasonableness of the amounts collected there is need to pay under protest </span></b><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">and administrative remedies must be resorted to before recourse to the proper courts.<o:p></o:p></span></p> <p class="MsoBodyText" style="margin-bottom: 0.0001pt; text-align: justify;"><span style="font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><o:p> </o:p></span></p> <p class="MsoNormal" style="text-align: center;" align="center"><b style=""><span style="font-size: 14pt; font-family: "Arial Black"; letter-spacing: -0.1pt;" lang="EN-US">REAL PROPERTY TAXATION<o:p></o:p></span></b></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><o:p> </o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><b style=""><u><span style="font-size: 12pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US">GENERAL CONCEPTS<o:p></o:p></span></u></b></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><o:p> </o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><b style=""><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span>1. <span style=""> </span>What are the fundamental principles of real property taxation ?<span style=""> </span><o:p></o:p></span></b></p> <p class="MsoNormal" style="text-align: justify;"><b style=""><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span></span></b><u><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US">SUGGESTED ANSWER</span></u><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US">:<span style=""> </span>The fundamental principles of real property taxation are:<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span>a.<span style=""> </span><span style=""> </span>Appraisal at current and fair market value;<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span>b.<span style=""> </span><span style=""> </span>Classification for assessment on the basis of actual use;<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span>c.<span style=""> </span><span style=""> </span>Assessment on the basis of uniform classification;<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span>d.<span style=""> </span><span style=""> </span>Appraisal, assessment, levy and collection shall not be let to a private person;<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span>e.<span style=""> </span><span style=""> </span>Appraisal and assessment shall be equitable.<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span><o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span><b style="">2.<span style=""> </span>Basis for appraisal.<span style=""> </span></b>Real properties shall be appraised at the current and fair market value prevailing in the locality where the property is situated and classified for assessment purposes on the basis of its actual use.<span style=""> </span>(<i style="">Allied Banking Corporation, etc., v. Quezon City Government, et al., </i>G. R. No. 154126, October 11, 2005)<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><o:p> </o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><b style=""><span style="font-size: 12pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US">KINDS OF REAL PROPERTY TAXES<o:p></o:p></span></b></p> <p class="MsoNormal" style="text-align: justify;"><b style=""><span style="font-size: 12pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US">THEIR LEVY AND IMPOSITION<o:p></o:p></span></b></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><o:p> </o:p></span></p> <p class="MsoNormal" style="text-align: justify; text-indent: 0.5in;"><b style=""><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">1.<span style=""> </span>The real property taxes that may be collected by provinces, cities and municipalities within the Metro </span></b><st1:place><b style=""><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">Manila</span></b></st1:place><b style=""><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"> area are the <o:p></o:p></span></b></p> <p class="MsoNormal" style="text-align: justify; text-indent: 0.5in;"><b style=""><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">a.<span style=""> </span>basic<span style=""> </span>real property tax, <o:p></o:p></span></b></p> <p class="MsoNormal" style="text-align: justify; text-indent: 0.5in;"><b style=""><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">b.<span style=""> </span>the special education fund, and<o:p></o:p></span></b></p> <p class="MsoNormal" style="text-align: justify; text-indent: 0.5in;"><b style=""><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">c.<span style=""> </span>the ad valorem tax on idle lands.<o:p></o:p></span></b></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>Unlike the special levy, the levy and collection of real property taxes are limited only to the above local government units.<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><o:p> </o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><b style=""><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>2.<span style=""> </span></span></b><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">A special levy or special assessment is an imposition by a province, a city, a municipality within the Metropolitan Manila Area, a municipality or a barangay upon real property specially benefited by a public works expenditure of the LGU to recover not more than 60% of such expenditures.<span style="letter-spacing: -0.1pt;"><o:p></o:p></span></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><o:p> </o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><b style=""><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span>3.<span style=""> </span><span style=""> </span>What are the steps to be followed for the mandatory conduct of General Revision of Real Property Assessments ?<o:p></o:p></span></b></p> <p class="MsoNormal" style="text-align: justify;"><b style=""><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span></span></b><u><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US">SUGGESTED ANSWER:<o:p></o:p></span></u></p> <p class="MsoNormal" style="text-align: justify;"><b style=""><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span></span></b><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US">a.<span style=""> </span><span style=""> </span>Preparation of Schedule of Fair Market Values;<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span>b .<span style=""> </span><span style=""> </span>Enactment of Ordinances:<o:p></o:p></span></p> <p class="MsoNormal" style="margin-left: 0.4in; text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span>1)<span style=""> </span><span style=""> </span>Levying an annual “<i style="">ad valorem</i>”<span style=""> </span>tax on real property and an additional tax accruing to the Special Education Fund;<o:p></o:p></span></p> <p class="MsoNormal" style="margin-left: 0.4in; text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span>2)<span style=""> </span><span style=""> </span>Fixing the assessment levels to be applied to the market values of real properties; <o:p></o:p></span></p> <p class="MsoNormal" style="margin-left: 0.4in; text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span>3)<span style=""> </span><span style=""> </span>Providing the necessary appropriations to defray expenses incident to general revision of real property assessments,; and<o:p></o:p></span></p> <p class="MsoNormal" style="margin-left: 0.4in; text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span>4)<span style=""> </span><span style=""> </span>Adopting the Schedule of Fair Market Values prepared by the assessors.<span style=""> </span>(<i style="">Lopez v. City of Manila, et al., </i>G.R. No. 127139, February 19, 1999)<i style=""><o:p></o:p></i></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><o:p> </o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><b style=""><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span>4.<span style=""> </span>What is the fair market value of properties ?<o:p></o:p></span></b></p> <p class="MsoNormal" style="text-align: justify;"><b style=""><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span></span></b><u><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US">SUGGESTED ANSWER</span></u><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US">:<span style=""> </span>Fair market value<b style=""> </b>is the price at which a property may be sold by a seller who is not compelled to sell and bought by a buyer who is not compelled to buy, taking into consideration all uses to which the property is adopted and might in reason be applied.<span style=""> </span><o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span>The criterion established by the statute contemplates a hypothetical sale.<span style=""> </span>Hence, the buyers need not be actual and existing purchasers.<span style=""> </span>(<i style="">Allied Banking Corporation, etc., v. Quezon City Government, et al., </i>G. R. No. 154126, October 11, 2005 citing <i style="">Army and Navy Club, Manila v. Trinidad,</i> 44 Phil. 383<i style=""> </i>)<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span><o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span><b style="">5.</b><span style=""> </span><b style="">Factors to be considered in fixing values of real property.</b> <span style=""> </span>In fixing the value of real property, assessors have to consider all the circumstances and elements of value and must exercise prudent discretion in reaching conclusions.<span style=""> </span>[<i style="">Allied Banking Corporation, etc., v. Quezon City Government, et al., </i>G. R. No. 154126, October 11, 2005 citing <i style="">Reyes v. Almanzor, </i>196 SCRA 322, 327 (1991)])<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><o:p> </o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span><b style="">6</b><span style=""> </span><b style="">Procedure for the preparation of fair market values.<o:p></o:p></b></span></p> <p class="MsoNormal" style="text-align: justify;"><b style=""><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span><span style=""> </span></span></b><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US">1)<span style=""> </span><span style=""> </span>The city or municipal assessor shall prepare a <span style=""> </span>schedule of fair market values for the different classes of real <span style=""> </span>property situated in their respective Local Government Units for <span style=""> </span>the enactment of an ordinance by the <i style="">sanggunian</i> concerned; <span style=""> </span>and<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span><span style=""> </span>2).<span style=""> </span><span style=""> </span>The schedule of fair market values shall be <span style=""> </span>published in a newspaper of general circulation in the province, <span style=""> </span>city or municipality concerned or the posting in the provincial <span style=""> </span>capitol or other places as required by law. <i style="">(Lopez v. City of <span style=""> </span>Manila, et al., </i>G.R. No. 127139, February 19, 1999)<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><o:p> </o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><b style=""><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span>7.</span></b><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span><b style="">Publication requirement.<span style=""> </span></b>Proposed fair market values of real property in a local government unit as well as the ordinance containing the schedule must be published in full for three (3) consecutive days in a newspaper of local circulation, where available, within ten (10) days of its approval, and posted in at lease two (2) prominent places in the provincial capitol, city, municipal or <i style="">barangay</i> hall for a minimum of three (3) consecutive weeks.<span style=""> </span><i style="">(Figuerres v. Court of Appeals, et al,. </i>G.R. No. 119172, </span><st1:date month="3" day="25" year="1999"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US">March 25, 1999</span></st1:date><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US">)<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><o:p> </o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span><b style="">8.<span style=""> </span></b></span><st1:city><st1:place><b style=""><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US">Quezon City</span></b></st1:place></st1:city><b style=""><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"> passed an ordinance whereby the “parcels of land sold, ceded. Transferred and conveyed for remuneratory consideration after the effectivity of this revision shall be subject to real estate tax based on the actual amount reflected in the deed of conveyance or the current approved zonal valuation of the Bureau of Internal Revenue prevailing at the time of sale, cession, transfer and conveyance, whichever is higher, as evidenced by the certificate of payment of the capital gains tax issued therefore.”<span style=""> </span><o:p></o:p></span></b></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span><b style="">Is the proviso for the basis in determining the value for real property tax purposes valid ?<o:p></o:p></b></span></p> <p class="MsoNormal" style="text-align: justify;"><b style=""><i style=""><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span></span></i></b><u><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US">SUGGESTED ANSWER</span></u><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US">:<span style=""> </span>No.<span style=""> </span>The proviso being contrary to public policy and for restraining trade is not valid for the following reasons:<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span>a.<span style=""> </span>It mandates an exclusive rule in determining the fair market value and departs from the established procedures such as the sales analysis approach, the income capitalization approach and the reproduction approach provided under the rules implementing the statute.<span style=""> </span>It unduly interferes with the duties statutorily placed upon the local assessor by completely dispensing with his analysis and discretion which the Local Government Code and the regulations require to be exercised.<span style=""> </span>An ordinance that contravenes any statute is <i style="">ultra vires </i>and void.<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span>b.<span style=""> </span>The “consideration approach” in the ordinance is illegal since “the appraisal, assessment, levy and collection of real property tax shall not be let to any private person”, it will also completely destroy the fundamental principle in real property taxation – that real property shall be classified, valued and assessed on the basis of its actual use regardless of where located, whoever owns it, and whoever uses it.<span style=""> </span>Allowing the parties to a private sale to dictate the fair market value of the property will dispense with the distinctions of actual use stated in the Local Government Code and in the regulations.<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span>c.<span style=""> </span>The invalidity is not cured by the prhase “whichever is higher” because an integral part of that system still permits valuing real property in disregard of its “actual use.”<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span>d.<span style=""> </span>The ordinance would result to real property assessments more than once every three (3) years and that is not the congressional intent as shown in the provisions of the Local Government Code and the regulations.<span style=""> </span>Consequently, the real property tax burden should not be interpreted to include those beyond what the Code or the regulations expressly clearly state.<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span>e.<span style=""> </span>The proviso would provide a chilling effect on real property owners or administrators to enter freely into contracts reflecting the increasing value of real properties in accordance with prevailing market conditions.<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span>While the Local Government Code provides that the assessment of real property shall not be increased once every three (3) years, the questioned proviso subjects the property to a higher assessment every time a sales transaction is made.<span style=""> </span>Real property owners would therefore postpone sales until after the lapse of the three (3) year period, or if they do so within the said period they shall be compelled to dispose of the property at a price not exceeding the last prior conveyance in order to avoid a higher tax assessment.<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span>In the above two scenarios real property owners are effectively prevented from obtaining the best price possible for their properties and unduly hampers the equitable distribution of wealth.<span style=""> </span>(<i style="">Allied Banking Corporation, etc., v. Quezon City Government, et al., </i>G. R. No. 154126, October 11, 2005)<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><o:p> </o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span><b style="">9.<span style=""> </span>What is the nature of a tax declaration ?<o:p></o:p></b></span></p> <p class="MsoNormal" style="text-align: justify;"><b style=""><i style=""><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span></span></i></b><u><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US">SUGGESTED ANSWER</span></u><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US">: As a rule, tax declarations or realty tax payments of property are not conclusive evidence of ownership, nevertheless, they are good <i style="">indicia</i> of possession in the concept of owner, for no one in his right mind would be paying taxes for a property that is not in his actual or constructive possession.<span style=""> </span>They constitute at least proof that the holder has a claim of title over the property.<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span>The voluntary declaration of a piece of property for taxation purposes manifests not only one’s sincere and honest desire to obtain title to the property and announces his adverse claim against the State and all other interested parties, but also the intention to contribute needed revenues to the government.<span style=""> </span>Such an act strengthens one’s <i style="">bona fide </i>claim of acquisition of ownership. <span style=""> </span>(<i style="">Buenaventura, et al., v. Republic, </i>G. R. No. 166865, <i style="">March</i> 2, 2007 citing <i style="">Heirs of Simplicio Santiago v. Heirs of Mariano E. Santiago, </i>G. R. No. 151440, 17 June 2003, 404 SCRA 193, 199 – 200)<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><o:p> </o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><b style=""><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span>10.<span style=""> </span>Give<span style=""> </span>examples of personal property under the civil law that may be considered as real property for purposes of taxes</span></b><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US">.<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span><u>SUGGESTED ANSWER:</u><span style=""> </span>Personal property under the civil law may be considered as real property for purposes of taxes where the property is essential to the conduct of the business. <o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span>a.<span style=""> </span>Underground tanks are essential to the conduct of the business of a gasoline station without which it would not be operational.<span style=""> </span>(<i style="">Caltex Phils., Inc. v. Central Board of Assessment Appeals, et al., </i>114 SCRA 296)<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><b style=""><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span></span></b><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US">b.<b style=""> <span style=""> </span></b>Light Rail Transit (LRT) improvements such as buildings, carriageways, passenger terminals stations, and similar<b style=""><i style=""> </i></b>structures do not form part of the public roads since the former are constructed over the latter in such a way that the flow of vehicular traffic would not be impaired.<span style=""> </span>The carriageways and terminals serve a function different from the public roads.<span style=""> </span>Furthermore, they are not open to use by the general public hence not exempt from real property taxes.<b style=""><span style=""> </span></b>Even granting that the national government owns the carriageways and terminal stations, the property is not exempt because their beneficial use has been granted to LRTA a taxable entity.<span style=""> </span><i style="">(Light Rail Transit Authority v. Central Board of Assessment Appeals, et al., </i>G. R. No. 127316, October 12, 2000)<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span>c.<span style=""> </span>The Supreme Court of New York in <i style="">Consolidated Edison Company of New York, Inc., et al., v.<span style=""> </span>The City of New York, et al., </i>80 Misc. 2d 1065 (1975) cited in <i style="">FELS Energy, Inc., v. Province of Batangas, </i>G. R. No. 168557, February 16, 2007 and companion case,<span style=""> </span>held that barges on which were mounted gas turbine power plants designated to generate electrical power, the fuel oil barges which supplied fuel oil to the power plant barges, and the accessory equipment mounted on the barges were subject to real property taxes.<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span>Moreover, Article 415(9) of the Civil Code provides that “[d]ocks and structures which, though floating, are intended by their nature and object to remain at a fixed place on a river, lake or coast” are considered immovable property by destination being intended by the owner for an industry or<span style=""> </span>work which may be carried on in a building or on a piece of land and which tend directly to meet the needs of said industry or work.<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><o:p> </o:p></span></p> <p class="MsoBodyText" style="text-align: justify; text-indent: 0.5in;"><b style=""><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">11.<span style=""> </span>Association of Benevola de Cebu, Inc. is a non-stock, non-profit organization organized under the laws of the Republic of the Philippines and is the owner of Chong Hua Hospital (CHH) in Cebu City.<span style=""> </span>In the late 1990’s, it constructed the CHH Medical Arts Center (CHHMAC). <span style=""> </span>It is the contention of the City Assessor that the medical arts center is commercial in nature because CHH is charging rental from the doctors that use the facility and is located 100 meters away from the main building. In turn these doctors also charge fees for the service they render to their patients.<span style=""> </span><span style=""> </span>Is the CHHMAC built by CHH to house its doctors a separate commercial establishment with an assessment rate of 35% on the building or an appurtenant to the hospital, treated as a special real property entitled to a 10% assessment currently imposed for CHH and its other separate buildings—the CHH’s Dietary and Records Departments for purposes of realty tax ?<span style=""> </span><span style=""> </span></span></b><u><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">SUGGESTED ANSWER:</span></u><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span><b style=""><span style=""> </span></b>CHHMAC is subject to the 10% assessment and not the 35% rate.<span style=""> </span><span style=""> </span>The doctors and medical specialists holding clinics in CHHMAC are those duly accredited by CHH, that is, they are consultants of the hospital and the ones who can treat CHH’s patients confined in it.<span style=""> </span><span style=""> </span>Thus, CHHMAC should not be categorized as “commercial” since a tertiary hospital like CHH is required by law to have a pool of physicians who comprises the required medical departments in various medical fields.<span style=""> </span><o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify; text-indent: 0.5in;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">It would have been different if CHHMAC was also open for non-accredited physicians, that is, any medical practitioner, for then CHHMAC would be running a commercial building for lease only to doctors which would indeed subject the CHHMAC to the commercial level of 35% assessment.<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify; text-indent: 0.5in;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">CHHMAC, being hundred meters away from the CHH main building, does not denigrate from its being an integral part of the latter.<span style=""> </span><o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify; text-indent: 0.5in;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">The <i>Herrera </i>ruling on what constitutes property exempt from taxation is indeed applicable in the instant case, thus:<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify; text-indent: 0.5in;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>Moreover, the exemption in favor of property used <span style=""> </span>exclusively for charitable or educational purposes is “not <span style=""> </span>limited to property actually indispensable” therefore <span style=""> </span>(Cooley <span style=""> </span>on Taxation, Vol. 2, p. 1430), but extends to <span style=""> </span>facilities which <span style=""> </span>are “incidental to and reasonably necessary for” the <span style=""> </span>accomplishment of said purposes, such as, in the case of <span style=""> </span>hospitals, “a school for training <span style=""> </span>nurses, a nurses’ home, <span style=""> </span>property use to provide housing <span style=""> </span>facilities for interns, resident <span style=""> </span>doctors, superintendents, <span style=""> </span>and other members of the hospital <span style=""> </span>staff, and <span style=""> </span>recreational facilities for student nurses, interns <span style=""> </span>and <span style=""> </span>residents” (84 C.J.S., 621), such as “athletic fields,” <span style=""> </span>including “a farm used for the inmates of the institution” <span style=""> </span>(Cooley on Taxation, Vol. 2, p. 1430).<o:p></o:p></span></p> <p class="MsoNormal" style="margin: 0in 0.7in 0.0001pt; text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><o:p> </o:p></span></p> <p class="MsoNormal" style="text-align: justify; text-indent: 0.5in;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">CHHMAC’s charge of rentals for the offices and clinics its accredited physicians occupy cannot be equated to a commercial venture, which is mainly for profit.<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>First, CHHMAC is only for its consultants or accredited doctors and medical specialists.<span style=""> </span>Second, the charging of rentals is a practical necessity:<span style=""> </span>(1) to recoup the investment cost of the building, (2) to cover the rentals for the lot CHHMAC is built on, and (3) to maintain the CHHMAC building and its facilities.<span style=""> </span>Third, as correctly pointed out by respondent, it pays the proper taxes for its rental income.<span style=""> </span>And, fourth, if there is indeed any net income from the lease income of CHHMAC, such does not inure to any private or individual person as it will be used for respondent’s other charitable projects.<span style=""> </span><span style="letter-spacing: -0.1pt;">(City Assessor of Cebu v. Association of Benevola de Cebu, Inc.., G. R. No. 152904, June 8, 2007)<o:p></o:p></span></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span><o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><o:p> </o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><b style=""><u><span style="font-size: 12pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US">TAX REMEDIES: REAL PROPERTY TAXATION<o:p></o:p></span></u></b></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><o:p> </o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><b style=""><span style="font-size: 11pt; font-family: Arial;" lang="EN-US"><span style=""> </span></span></b><b style=""><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">1.<span style=""> </span><span style=""> </span>The concurrent and simultaneous remedies afforded local government units in enforcing collection of real property taxes:<o:p></o:p></span></b></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>a.<span style=""> </span><span style=""> </span>Distraint of personal property;<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>b. <span style=""> </span></span><st1:city><st1:place><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">Sale</span></st1:place></st1:city><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"> of delinquent real property, and<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>c.<span style=""> </span><span style=""> </span>Collection of real property tax through ordinary court action.<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><o:p> </o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span><b style="">2.<span style=""> </span><span style=""> </span>Procedure for refund of real property taxes based on unreasonableness or excessiveness of amounts collected.<o:p></o:p></b></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>a.<span style=""> </span>Payment under protest at the time of payment or within thirty (30) days thereafter, protest being lodged to the provincial, city or in the case of a municipality within the Metro Manila Area the municipal treasurer.<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>b.<span style=""> </span>The treasurer has a period of sixty (60) days from receipt of the protest within to decide.<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>c.<span style=""> </span>Within thirty (30) days from receipt of treasurer’s decision or if the treasurer does not decide, within thirty (30) days from the expiration of the sixty (60) period for the treasurer to decide, the taxpayer should file an appeal with the Local Board of Assessment Appeals.<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>d.<span style=""> </span>The Local Board of Assessment Appeals has 120 days from receipt of the appeal within which to decide.<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>e.<span style=""> </span>The adverse decision of the Local Board of Assessment Appeals should be appealed within thirty (30) days from receipt to the Central Board of Assessment Appeals.<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>f.<span style=""> </span>The adverse decision of the Central Board of Assessment Appeals shall be appealed to the Court of Tax Appeals (<i style="">En Banc</i>) by means of a petition for review within thirty (30) days from receipt of the adverse decision.<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>g.<span style=""> </span>The decision of the CTA may be the subject of a motion for reconsideration or new trial after which an appeal may be interposed by means of a petition for review on certiorari directed to the Supreme Court on pure questions of law within a period of fifteen (15) days from receipt extendible for a period of thirty (30) days.<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><o:p> </o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><b style=""><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span>3. <span style=""> </span>What is the rationale for the restriction upon the requirement for payment under protest of real property taxes ?<o:p></o:p></span></b></p> <p class="MsoNormal" style="text-align: justify;"><b style=""><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span></span></b><u><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US">SUGGESTED ANSWER:</span></u><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span>The restriction upon the power of courts to impeach tax assessment without a prior payment, under protest, of the taxes assessed is consistent with the doctrine that taxes are the lifeblood of the nation, and as such their collection cannot be curtailed by injunction or any like action; otherwise, the state or, in this case, the local government unit, shall be crippled in dispensing the needed services to the people, and its machinery gravely disabled.<span style=""> </span><i style="">(Manila Electric Company v. Barlis, </i>G.R. No. 114231, </span><st1:date month="5" day="18" year="2001"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US">May 18, 2001</span></st1:date><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US">)<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span>Thus, the trial court has no jurisdiction to entertain a petition for prohibition absent payment under protest of the tax assessed.<span style=""> </span>(<i style="">Ibid.)<o:p></o:p></i></span></p> <p class="MsoNormal" style="text-align: justify;"><i style=""><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span></span></i><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><b style=""><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span>4.<span style=""> </span><span style=""> </span><span style=""> </span>Unpaid real property taxes are considered as liens upon the property form which they were due.<span style=""> </span>May such property be proceeded against if it is already owned by one other than the one who used it at the time the real property taxes were due ?<span style=""> </span>Explain your answer briefly.<o:p></o:p></span></b></p> <p class="MsoNormal" style="text-align: justify;"><b style=""><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span></span></b><u><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US">SUGGESTED ANSWER:</span></u><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span>No.<span style=""> </span>While unpaid realty taxes attach to the property and is chargeable against the person who had actual or beneficial use and possession of it regardless of whether or not he is the owner, to impose the real property tax on the subsequent owner which was neither the owner not the beneficial user of the property during the designated periods would not only be contrary to law but also unjust.<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify; text-indent: 0.5in;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US">Consequently, MERALCO the former owner/user of the property was required to pay the tax instead of the new owner NAPOCOR<i style="">. (Manila Electric Company v. Barlis, </i>G.R. No. 114231, </span><st1:date month="5" day="18" year="2001"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US">May 18, 2001</span></st1:date><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US">)<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><o:p> </o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><b style=""><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span>5.<span style=""> </span><span style=""> </span>May personal property be distrained in order to enforce real property tax delinquencies ?<span style=""> </span>Explain briefly. <o:p></o:p></span></b></p> <p class="MsoNormal" style="text-align: justify;"><b style=""><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span></span></b><u><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US">SUGGESTED ANSWER:</span></u><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span>Yes.<span style=""> </span>The LGU could also avail of the remedy of distraint and levy of personal property subjecting any personal property of the taxpayer to execution. <span style=""> </span>Thus, the issuance of the warrants of garnishment over MERALCO’s bank deposits was not improper or irregular.<span style=""> </span><i style="">(Manila Electric Company v. Barlis, et al</i>., G.R. No. 114231, </span><st1:date month="5" day="18" year="2001"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US">May 18, 2001</span></st1:date><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US">)<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><i style=""><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span></span></i><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US">NOTE:<span style=""> </span>The above </span><st1:date month="5" day="18" year="2001"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US">May 18, 2001</span></st1:date><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"> decision was set aside by the Supreme Court when it granted the petitioner’s second motion for reconsideration on </span><st1:date month="6" day="29" year="2004"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US">June 29, 2004</span></st1:date><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US">.<span style=""> </span>The author submits that the above ruling in the </span><st1:date month="5" day="18" year="2001"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US">May 18, 2001</span></st1:date><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"> decision is still valid, not on the basis of the </span><st1:date month="5" day="18" year="2001"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US">May 18, 2001</span></st1:date><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"> decision, in the light of pronouncements of the Supreme Court in other cases.<span style=""> </span>Thus, do not cite the doctrine as emanating from the </span><st1:date month="5" day="18" year="2001"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US">May 18, 2001</span></st1:date><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"> decision.<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><o:p> </o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><b style=""><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span>6.<span style=""> </span><span style=""> </span>What is the nature of the publication requirement for delinquency sales of real property ?<span style=""> </span>What is the reason behind this nature ?<o:p></o:p></span></b></p> <p class="MsoNormal" style="text-align: justify;"><b style=""><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span></span></b><u><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US">SUGGESTED ANSWER:</span></u><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span>Notice and publication, as well as the legal requirements for a tax delinquency sale, are mandatory, and the failure to comply therewith can invalidate the sale.<span style=""> </span>The prescribed notices must be sent to comply with the requirements of due process<i style="">.<span style=""> </span>(De Knecht, et al,. v. Court of Appeals; De Knecht, et al., v. Honorable Sayo, </i>290 SCRA 223,236)<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span>The reason behind the notice requirement is that tax sales are administrative proceedings which are <i style="">in personam </i>in nature.<span style=""> </span></span><i style=""><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="ES-TRAD">(Puzon v. Abellera, </span></i><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="ES-TRAD">169 SCRA 789, 795<i style="">; De Asis v. I.A.C., </i>169 SCRA 314)<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><o:p> </o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span><b style="">7.<span style=""> </span>FELS Energy, Inc., had a contract to supply NPC with the electricity <span style=""> </span>generated by FELS’ power barges.<span style=""> </span>The contract also stated that NPC shall be responsible for all real estate taxes and assessments.<span style=""> </span>FELS then received an assessment of real property taxes on its power barges from the Provincial Assessor of Batangas.<span style=""> </span>If filed a motion for reconsideration with the Provincial Assessor.<span style=""> </span><o:p></o:p></b></span></p> <p class="MsoNormal" style="text-align: justify;"><b style=""><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span>a.<span style=""> </span>Upon denial, FELS elevated the matter to the Local Board of Assessment Appeals (LBAA), where it raised the following issues:<o:p></o:p></span></b></p> <p class="MsoNormal" style="margin-left: 0.4in; text-align: justify; text-indent: -0.4in;"><b style=""><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span><span style=""> </span>1)<span style=""> </span>Since NPC is tax-exempt then FEL’s should also be tax-exempt because of its contract with NPC.<o:p></o:p></span></b></p> <p class="MsoNormal" style="margin-left: 0.4in; text-align: justify; text-indent: -0.4in;"><b style=""><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span><span style=""> </span>2)<span style=""> </span>The power barges are not real property subject to real property taxes.<o:p></o:p></span></b></p> <p class="MsoNormal" style="text-align: justify;"><b style=""><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span>b.<span style=""> </span>Upon the other hand the Local Treasurer insists that the assessment has attained a state of finality hence the appeal to the LBAA should be dismissed.<o:p></o:p></span></b></p> <p class="MsoNormal" style="text-align: justify;"><b style=""><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span>Rule on the conflicting contentions.<o:p></o:p></span></b></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span><u>SUGGESTED ANSWER:</u><span style=""> </span><o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span>a.<span style=""> </span>All the contentions of FELS are without merit:<o:p></o:p></span></p> <p class="MsoNormal" style="margin-left: 0.4in; text-align: justify; text-indent: -0.4in;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span><span style=""> </span>1)<span style=""> </span>NPC is not the owner of the power barges nor the operator of the power barges.<span style=""> </span>The tax exemption privilege granted to NPC cannot be extended <span style=""> </span>to FELS.<span style=""> </span>the covenant is between NPC and FELs and does not bind a third person not privy to the contract such as the </span><st1:place><st1:placetype><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US">Province</span></st1:placetype><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"> of </span><st1:placename><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US">Batangas</span></st1:placename></st1:place><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US">.<o:p></o:p></span></p> <p class="MsoNormal" style="margin-left: 0.4in; text-align: justify; text-indent: -0.4in;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span><span style=""> </span>2)<span style=""> </span>The Supreme Court of </span><st1:state><st1:place><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US">New York</span></st1:place></st1:state><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"> in <i style="">Consolidated Edison Company of New York, Inc., et al., v.<span style=""> </span>The City of New York, et al., </i>80 Misc. 2d 1065 (1975) cited in <i style="">FELS Energy, Inc., v. Province of Batangas, </i>G. R. No. 168557, February 16, 2007 and companion case,<span style=""> </span>held that barges on which were mounted gas turbine power plants designated to generate electrical power, the fuel oil barges which supplied fuel oil to the power plant barges, and the accessory equipment mounted on the barges were subject to real property taxes.<o:p></o:p></span></p> <p class="MsoNormal" style="margin-left: 0.4in; text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span>Moreover, Article 415(9) of the Civil Code provides that “[d]ocks and structures which, though floating, are intended by their nature and object to remain at a fixed place on a river, lake or coast” are considered immovable property by destination being intended by the owner for an industry or<span style=""> </span>work which may be carried on in a building or on a piece of land and which tend directly to meet the needs of said industry or work.<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span>b.<span style=""> </span>The Treasurer is correct.<span style=""> </span>The procedure do not allow a motion for reconsideration to be filed with the Provincial Assessor.<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span>To allow the procedure would indeed invite corruption in the system of appraisal and assessment.<span style=""> </span>it conveniently courts a graft-prone situation where values of real property may be initially set unreasonably high, and then subsequently reduced upon the request of a property owner.<span style=""> </span>In the latter instance, allusions of possible cover, illicit trade-off cannot be avoided, and in fact can conveniently take place.<span style=""> </span>Such occasion for mischief must be prevented and excised from our system.<span style=""> </span>(<i style="">FELS Energy, Inc., v. </i></span><st1:place><st1:placetype><i style=""><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US">Province</span></i></st1:placetype><i style=""><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"> of </span></i><st1:placename><i style=""><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US">Batangas</span></i></st1:placename></st1:place><i style=""><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US">, </span></i><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US">G. R. No. 168557, </span><st1:date month="2" day="16" year="2007"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US">February 16, 2007</span></st1:date><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"> and companion case, citing <i style="">Callanta v. Office of the Ombudsman. </i>G. R. Nos. 115253-74, </span><st1:date month="1" day="30" year="1998"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US">January 30, 1998</span></st1:date><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US">, 285 SCRA 648)<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><o:p> </o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span><b style="">8.<span style=""> </span>A notice of assessment issued by a local assessor is not the subject of a motion for reconsideration that must be appealed to the LBAA.<span style=""> </span></b>The last action of the local assessor on a particular assessment shall be the notice of assessment.<span style=""> </span>It is this last action which gives the owner of the property the right to appeal to the LBAA.<span style=""> </span>The procedure does not permit the property owner the remedy of filing a motion for reconsideration before the local assessor,<span style=""> </span>(<i style="">FELS Energy, Inc., v. </i></span><st1:place><st1:placetype><i style=""><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US">Province</span></i></st1:placetype><i style=""><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"> of </span></i><st1:placename><i style=""><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US">Batangas</span></i></st1:placename></st1:place><i style=""><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US">, </span></i><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US">G. R. No. 168557, </span><st1:date month="2" day="16" year="2007"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US">February 16, 2007</span></st1:date><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"> and companion case, citing <i style="">Callanta v. Office of the Ombudsman. </i>G. R. Nos. 115253-74, </span><st1:date month="1" day="30" year="1998"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US">January 30, 1998</span></st1:date><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US">, 285 SCRA 648)<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><o:p> </o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span><b style="">9.<span style=""> </span>A City Ordinance adopting a method of assessment was nullified by the Supreme Court.<span style=""> </span>A taxpayer who has paid his real property taxes on the basis of the nullified ordinance now posits that the return of the real property tax erroneously collected and paid is a necessary consequence of the Supreme Court’s nullification of the ordinance and there is no need to claim for a refund.<span style=""> </span>Is this correct ?<o:p></o:p></b></span></p> <p class="MsoNormal" style="text-align: justify;"><b style=""><i style=""><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span></span></i></b><u><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US">SUGGESTED ANSWER</span></u><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US">:<span style=""> </span>No.<span style=""> </span>The entitlement to a tax refund does not necessarily call for the automatic payment of the sum claimed.<span style=""> </span>The amount of the claim being a factual matter, it must still be proven in the normal course and in accordance with the administrative procedure for obtaining a refund of real property taxes, as provided under the Local Government Code.<span style=""> </span>(<i style="">Allied Banking Corporation, etc., v. Quezon City Government, et al., </i>G. R. No. 154126, September 15, 2006)<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span></span><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span><b style="">10.<span style=""> </span>Procedure for refund of real property taxes based on validity of the tax measure or <i style="">solutio indebeti.<o:p></o:p></i></b></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>a.<span style=""> </span>Payment under protest not required, claim must be directed to the local treasurer, who must decide within sixty (60) days from receipt.<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>b.<span style=""> </span>The denial by the local treasurer of the protest would fall within the Regional Trial Court’s original jurisdiction, the review being the initial judicial cognizance of the matter.<span style=""> </span>Despite the language of Section 195 of the Local Government Code which states that the remedy of the taxpayer whose protest is denied by the local treasurer is “to appeal with the court of competent jurisdiction,”<span style=""> </span>labeling the said review as an exercise of appellate jurisdiction is inappropriate since the denial of the protest is not the judgment or order of a lower court, but of a local government official.<span style=""> </span>(<i style="">Yamane , etc. v. BA Lepanto Condominium Corporation, </i>G. R. No. 154993, October 25, 2005)<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>c.<span style=""> </span>The decision of the Regional Trial Court should be appealed by means of a petition for review directed to the Court of Tax Appeals (Division).<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>d.<span style=""> </span>The decision of the Court of Tax Appeals (Division) may be the subject of a review by the Court of Tax Appeals (<i style="">en banc</i>).<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>e.<span style=""> </span>The decision of the Court of Tax Appeals (<i style="">en banc</i>) may be the subject of a petition for review on certiorari on pure questions of law directed to the Supreme Court.<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><o:p> </o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><o:p> </o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><b style=""><u><span style="font-size: 12pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US">STATUTORY TAX EXEMPTIONS<o:p></o:p></span></u></b></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><o:p> </o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><b style=""><span style="font-size: 14pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span></span></b><span style="font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><b style=""><span style="font-size: 11pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span></span></b><b style=""><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US">11.<span style=""> </span>Are port and other facilities owned by the Philippine Ports Authority exempt from real property taxes ?<o:p></o:p></span></b></p> <p class="MsoNormal" style="text-align: justify;"><b style=""><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span></span></b><u><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US">SUGGESTED ANSWER:</span></u><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span>No.<span style=""> </span>The fact that the port and its facilities and appurtenances, owned by the Philippine Ports Authority (PPA), are accessible to the general public does not exempt it from the payment of real property taxes. These are patrimonial properties of PPA, not for public use, and that the operation of the port and its facilities and the administration of its buildings are in the nature of ordinary business.<span style=""> </span>PPA is a profit earning corporation, hence its patrimonial properties are subject to tax.<span style=""> </span>[<i style="">Philippine<span style=""> </span>Ports Authority v. City of Iloilo, et al., </i>G. R. No. 143214, November 11, 2004 citing <i style="">Light Rail Transit Authority v. Central Board of Assessment Appeals, </i>342 SCRA 692 (2000)]<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span><u><o:p></o:p></u></span></p> <p class="MsoBodyText" style="margin-bottom: 0.0001pt; text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span><b style="">12.<span style=""> </span></b><span style=""> </span><b style="">Warehouses located in ports are property subject to real property taxes</b>.<span style=""> </span>Ports constructed by the State are properties of the public dominion under Art. 420 of the Civil Code which enumerates these as properties intended for public use.<o:p></o:p></span></p> <p class="MsoBodyText" style="margin-bottom: 0.0001pt; text-align: justify; text-indent: 27pt;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US">Be that as it may, a warehouse, which, although located within the port is distinct from the port itself.<span style=""> </span>Thus, it is subject to tax.<span style=""> </span>The warehouse, in the case at bar,<span style=""> </span>may not be held as part of the port, considering its separable nature as an improvement upon the port, and the fact that it is not open for use by everyone and freely accessible to the public.<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US">In the same way that the Supreme Court once ruled, that the exemption of public property from taxation does not extend to improvements made thereon by homesteaders or occupants at their own expense, it likewise upheld the taxability of the warehouse, in the case at bar, it being a mere improvement built on an alleged property of public domain.<span style=""> </span>(<i style="">Philippine Ports Authority v. City of Iloilo, </i>G. R. No. 109791, July 14, 2003)<span style=""> </span>This is still good doctrine.<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><b style=""><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span></span></b><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><b style=""><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>13.<span style=""> </span>The Manila International Airport Authority (MIAA) was subject to real property taxes by the municipality of Paranaque on its airport lands, and buildings on the ground that the Local Government Code has withdrawn exemptions previously enjoyed by government-owned and controlled corporations.<span style=""> </span>MIAA contends otherwise as it claims it is not a government owned or controlled corporation.<span style=""> </span>Who is correct.<o:p></o:p></span></b></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span><u>SUGGESTED ANSWER:</u><span style=""> </span>MIAA is correct because it is not a government owned or controlled corporation but an instrumentality of the government that is exempt from taxation.<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>It is not a stock corporation because its capital is not divided into shares, neither is it a non-stock corporation because there are no members.<span style=""> </span>It is instead an instrumentality of the government upon which the local governments are not allowed to levy taxes, fees or other charges.<span style=""> </span><o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>An instrumentality “refers to any agency of the National Government, not integrated within the department framework vested with special functions or jurisdiction by law, endowed with some if not all corporate powers, administering special funds, and enjoying operational autonomy, usually through a charter.<span style=""> </span>This term includes regulatory agencies chartered institutions and government-owned or controlled corporations.”<span style=""> </span>[Sec. 2 (10), Introductory Provisions, Administrative Code of 1987]<span style=""> </span>It is an instrumentality exercising not only governmental but also corporate powers.<span style=""> </span>It exercises governmental powers of eminent domain, police power authority, and levying of fees and charges.<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>Finally, the airport lands and buildings are property owned by the government that are devoted to public use and are properties of the public domain.<span style=""> </span>(<i style="">Manila International Airport Authority v. Court of Appeals, et al., </i>G. R. No. 155650, July 20, 2006)<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><o:p> </o:p></span></p> <p class="MsoBodyText" style="margin-bottom: 0.0001pt; text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span><b style="">14.<span style=""> </span>The primary reason for the withdrawal of tax exemption privileges granted to government-owned and controlled corporations and all other units of government</b> was that such privilege resulted to serious tax base erosion and distortions in the tax treatment of similarly situated enterprises, hence resulting in the need for these entities to share in their requirements of development, fiscal or otherwise, by paying the taxes and other charges due from them.<span style=""> </span>(<i style="">Philippine Ports Authority v. City of Iloilo, </i>G.R. No. 109791, July 14, 2004 citing <i style="">Mactan Cebu International Airport Authority v. Marcos, </i>261 SCRA 667)<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><o:p> </o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span><b style="">15.<span style=""> </span>Two (2) parcels of land previously owned by GSIS and sold to private parties were bought at public auction by a private individual to satisfy real property tax delinquencies. Since the original owner’s duplicate TCT could not be found, the buyer sought the registration of the land in her name.<span style=""> </span>The court ordered the cancellation of GSIS’ title and the issuance of a new title in the buyer’s name.<o:p></o:p></b></span></p> <p class="MsoNormal" style="text-align: justify;"><b style=""><i style=""><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span></span></i></b><b style=""><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US">GSIS now annulment of the decision claiming that it is exempt from payment of real property taxes in accordance with its charter R. A. No. 8291 which provides among others that, “Accordingly, notwithstanding any laws to the contrary, the GSIS, its assets, revenues, including all accruals thereto, and benefits paid shall be exempt from all taxes, assessment fees, charges or duties of all kinds.”<span style=""> </span>(Sec. 39)<span style=""> </span>It is the claim of GSIS that the above provisions of R.A. No. 8291, a later law,<span style=""> </span>abrogated the provisions of R.A. No. 7160.<o:p></o:p></span></b></p> <p class="MsoNormal" style="text-align: justify;"><b style=""><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span>Is the contention of GSIS tenable?<o:p></o:p></span></b></p> <p class="MsoNormal" style="text-align: justify;"><b style=""><i style=""><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span></span></i></b><u><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US">SUGGESTED ANSWER:</span></u><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span>No. Even if the charter of GSIS generally exempts it from tax liabilities, the prescription is not so encompassing as to make the tax exemption applicable to the properties in dispute.<span style=""> </span>The properties were already transferred and the alienation of the properties sold by GSIS was the proximate cause and necessary consequence of the delinquent taxes due.<span style=""> </span>(<i style="">Government Service Insurance System v. City Assessor of Iloilo City, et al., </i>G.R. No. 147192, June 27, 2006 citing <i style="">City of Baguio v. Busuego, </i>No. L-29772, </span><st1:date month="9" day="18" year="1980"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US">18 September 1980</span></st1:date><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US">, 100 SCRA 116)<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span>The allegation of the repeal of R.A. No. 7160 by R.A. 8291, is not convincing. Repeal cannot be assumed; the intention to revoke must be clear and manifest. To bring about an implied repeal, the two laws must be clearly repugnant in away that the later law R.A. 8291 could not exist without nullifying the earlier law, R. A. No. 7160.<span style=""> </span>(<i style="">Government Service Insurance System, supra</i>)<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span>Sec. 39 of R.A. No. 8291 should be read consistently with its avowed purpose – the maintenance of its actuarial solvency to finance the retirement, disability and life insurance benefits of its members.<span style=""> </span>The tax-exempt properties and assets of GSIS referred to those that remained at its disposal and use, either for investment or for income generating purposes.<span style=""> </span>Properties whose actual and beneficial use had been transferred to private taxable persons, for consideration or otherwise, are excluded and are thus taxable.<span style=""> </span>.<span style=""> </span>(<i style="">Ibid, </i>citing <i style="">Rubia<span style=""> </span>v. Government Service Insurance System, </i>G.R. No. 151439, </span><st1:date month="6" day="21" year="2004"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US">21 June 2004</span></st1:date><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US">, 432 SCRA529))<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><o:p> </o:p></span></p> <p class="MsoNormal" style="text-align: justify; text-indent: 0.4in;"><b style=""><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">16.<span style=""> </span>A telecommunications company was granted by Congress on July 20, 1992, after the effectivity of the Local Government Code on January 1, 1992, a legislative franchise with tax exemption privileges which partly reads, “The grantee, its successors or assigns shall be liable to pay the same taxes on their real estate, buildings and personal property</span></b><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">, exclusive of this franchise, <b style="">as other persons or corporations are now or hereafter may be required by law to pay.” This provision existed in the company’s franchise prior to the effectivity of the Local Government Code. A City then enacted an ordinance in 1993 imposing a real property on all real properties located within the city limits, and withdrawing all tax exemptions previously granted.<span style=""> </span>Among properties covered are those owned by the company from which the City is now collecting P43 million.<span style=""> </span>The properties of the company were then scheduled by the City for sale at public auction.<o:p></o:p></b></span></p> <p class="MsoNormal" style="text-align: justify;"><b style=""><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>The company then filed a petition for the issuance of a writ of prohibition claiming exemption under its legislative franchise.<span style=""> </span>The City defended its position raising the following:<o:p></o:p></span></b></p> <p class="MsoNormal" style="text-align: justify;"><b style=""><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>a.<span style=""> </span>There was no exhaustion of administrative remedies because the matter should have first been filed before the Local Board of Assessment Appeals;<o:p></o:p></span></b></p> <p class="MsoNormal" style="text-align: justify;"><b style=""><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>b.<span style=""> </span>The company’s properties are exempt from tax under its franchise.<o:p></o:p></span></b></p> <p class="MsoNormal" style="text-align: justify;"><b style=""><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>Resolve the issues raised.<o:p></o:p></span></b></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span><u>SUGGESTED ANSWERS:<o:p></o:p></u></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>a.<span style=""> </span>There is no need to exhaust administrative remedies as the appeal to the LBAA is not a speedy and adequate remedy within the law.<span style=""> </span>This is so because the properties are already scheduled for auction sale.<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>Furthermore one of the recognized exceptions to the rule on exhaustion is that if the issue is purely legal in character which is so in this case.<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>b.<span style=""> </span>The properties are exempt from taxation.<span style=""> </span>The grant of taxing powers to local governments under the Constitution and the Local Government Code does not affect the power of Congress to grant tax exemptions.<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>The term “exclusive of this franchise” is interpreted to mean properties actually, directly and exclusively used in the radio or telecommunications business.<span style=""> </span>The subsequent piece of legislation which reiterated the phrase “exclusive of this franchise” found in the previous tax exemption grant to the company is an express and real intention on the part of Congress to once against remove from the LGC’s delegated taxing power, all of the company’s properties that are actually, directly and exclusively used in the pursuit of its franchise.<span style=""> </span>(<i style="">The City Government of Quezon City, et al., v. Bayan Telecommunications, Inc.,<span style=""> </span></i>G. R. No. 162015, March 6, 2006)<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-family: Arial;" lang="EN-US"><o:p> </o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><b style=""><span style="font-size: 11pt; font-family: Arial;" lang="EN-US"><span style=""> </span></span></b><span style="font-family: Arial;" lang="EN-US"><o:p></o:p></span></p> <p class="MsoNormal" style="text-align: center;" align="center"><b style=""><span style="font-size: 18pt; font-family: "Comic Sans MS";" lang="EN-US">ADVANCE CONGRATULATIONS AND SEE YOU IN COURT<o:p></o:p></span></b></p>
<br /><span style="font-size: 11pt; font-family: Arial;" lang="EN-US"><u><o:p></o:p></u></span><p></p> Anonymoushttp://www.blogger.com/profile/03321018346771806482noreply@blogger.com0tag:blogger.com,1999:blog-5764462155582353229.post-56636819819670539292008-09-10T22:12:00.001+08:002008-09-10T22:29:43.502+08:00PRIMUS 2008 ONE-LINERS: TAXATION PART 1<meta equiv="Content-Type" content="text/html; charset=utf-8"><meta name="ProgId" content="Word.Document"><meta name="Generator" content="Microsoft Word 10"><meta name="Originator" content="Microsoft Word 10"><link rel="File-List" href="file:///C:%5CUsers%5CVenny%5CAppData%5CLocal%5CTemp%5Cmsohtml1%5C01%5Cclip_filelist.xml"><o:smarttagtype namespaceuri="urn:schemas-microsoft-com:office:smarttags" name="State"></o:smarttagtype><o:smarttagtype namespaceuri="urn:schemas-microsoft-com:office:smarttags" name="place"></o:smarttagtype><o:smarttagtype namespaceuri="urn:schemas-microsoft-com:office:smarttags" name="City"></o:smarttagtype><o:smarttagtype namespaceuri="urn:schemas-microsoft-com:office:smarttags" name="date"></o:smarttagtype><o:smarttagtype namespaceuri="urn:schemas-microsoft-com:office:smarttags" name="PlaceName"></o:smarttagtype><o:smarttagtype namespaceuri="urn:schemas-microsoft-com:office:smarttags" name="PlaceType"></o:smarttagtype><o:smarttagtype namespaceuri="urn:schemas-microsoft-com:office:smarttags" name="country-region"></o:smarttagtype><!--[if gte mso 9]><xml> <w:worddocument> <w:view>Normal</w:View> <w:zoom>0</w:Zoom> <w:compatibility> <w:breakwrappedtables/> <w:snaptogridincell/> <w:applybreakingrules/> <w:wraptextwithpunct/> <w:useasianbreakrules/> <w:usefelayout/> </w:Compatibility> <w:browserlevel>MicrosoftInternetExplorer4</w:BrowserLevel> </w:WordDocument> </xml><![endif]--><!--[if !mso]><object classid="clsid:38481807-CA0E-42D2-BF39-B33AF135CC4D" id="ieooui"></object> <style> st1\:*{behavior:url(#ieooui) } </style> <![endif]--><style> <!-- /* Font Definitions */ @font-face {font-family:SimSun; 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mso-level-tab-stop:1.0in; mso-level-number-position:left; text-indent:-.25in; mso-ansi-font-size:12.0pt; mso-ansi-font-weight:bold;} @list l28:level3 {mso-level-tab-stop:35.25pt; mso-level-number-position:left; margin-left:35.25pt; text-indent:-30.75pt; mso-ansi-font-size:12.0pt; mso-bidi-font-size:12.0pt; mso-ansi-font-weight:bold; mso-ansi-font-style:normal;} ol {margin-bottom:0in;} ul {margin-bottom:0in;} --> </style><!--[if gte mso 10]> <style> /* Style Definitions */ table.MsoNormalTable {mso-style-name:"Table Normal"; mso-tstyle-rowband-size:0; mso-tstyle-colband-size:0; mso-style-noshow:yes; mso-style-parent:""; mso-padding-alt:0in 5.4pt 0in 5.4pt; mso-para-margin:0in; mso-para-margin-bottom:.0001pt; mso-pagination:widow-orphan; font-size:10.0pt; font-family:"Times New Roman";} </style> <![endif]--> <p class="MsoTitle"><span style="font-size: 16pt;" lang="EN-US">“PRIMUS </span><span style="font-size: 16pt; font-weight: normal;" lang="EN-US">2008 </span><span style="font-size: 16pt;" lang="EN-US">ONE-LINERS”<o:p></o:p></span></p> <p class="MsoTitle" style="text-align: justify;"><span style="font-size: 18pt; font-weight: normal;" lang="EN-US"><o:p> </o:p></span></p> <p class="MsoNormal" style="text-align: center;" align="center"><b style=""><span style="font-size: 24pt; font-family: "Arial Black";" lang="EN-US"><span style=""> </span></span></b><b style=""><span style="font-size: 24pt; font-family: "Arial Black";" lang="EN-US">TAXATION</span></b><b style=""><span style="font-size: 24pt; font-family: "Arial Black";" lang="EN-US"><o:p></o:p></span></b></p> <p class="MsoNormal" style="text-align: center;" align="center"><span style="font-family: Arial;" lang="EN-US">VER. 2008.09.10<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: center;" align="center"><span style="font-family: Arial;" lang="EN-US">copyrighted 2008<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: center;" align="center"><b style=""><span style="font-family: Arial;" lang="EN-US"><o:p> </o:p></span></b></p> <p class="MsoNormal" style="text-align: center;" align="center"><span style="font-size: 12pt; font-family: Arial;" lang="EN-US">Prepared by the <b style="">PRIMUS</b> Board of Cons</span><span style="font-size: 11pt; font-family: Arial;" lang="EN-US">ultants<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: center;" align="center"><span style="font-size: 11pt; font-family: Arial;" lang="EN-US">Prof. Abelardo T. Domondon<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: center;" align="center"><span style="font-size: 11pt; font-family: Arial;" lang="EN-US">Principal Consultant<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: center;" align="center"><span style="font-family: Arial;" lang="EN-US"><o:p> </o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><b style=""><span style="font-size: 14pt; font-family: Arial;" lang="EN-US"><span style=""> </span></span></b><span style="font-size: 11pt; font-family: Arial;" lang="EN-US">These Notes in the form of one or two sentences and questions and answers were specially prepared by a<span style=""> </span>Board of Consultants specially commissioned by <b style="">PRIMUS</b> Information Center, Inc., for the use of candidates who are going to take the 2008 Bar Examination.<span style=""> </span>They are not as comprehensive as the other <b style="">PRIMUS </b>publications such as the <b style="">PRIMUS </b>Bar Star Notes, or the <b style="">PRIMUS </b>Cut and Paste.<span style=""> </span>They are intended to be read during the Pre-Week or before the start of the regular Bar review for any given Bar Examination year.<b style=""> </b><span style=""> </span><u><o:p></o:p></u></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-family: Arial;" lang="EN-US"><o:p> </o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 12pt; font-family: Arial;" lang="EN-US"><span style=""> </span></span><span style="font-size: 11pt; font-family: Arial;" lang="EN-US">These Notes attempt to second guess the areas where questions may probably be sourced for the 2008 Bar Examination in Taxation. They include enumerations and distinctions, as well digests of some landmark cases, although they go beyond two sentences. They may also serve as “memory joggers” to help the candidate recall concepts.<span style=""> </span>The reader is advised to concentrate on the “One-liners” that are in bold letters.<span style=""> </span>Those that are not in bold are mere elucidations of concepts.<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-family: Arial;" lang="EN-US"><o:p> </o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 11pt; font-family: Arial;" lang="EN-US"><span style=""> </span>The </span><span style="font-size: 11pt; font-family: Arial;" lang="EN-US">“<b style="">PRIMUS</b> 2008<b style=""> ONE-LINERS</b>” shall be revised regularly to consider latest law and jurisprudence to meet the requirements of future Bar Reviews such that the title shall change from year to year. For the 2009 Bar examination the title shall be “<b style="">PRIMUS</b> 2009<b style=""> ONE-LINERS”</b> which shall be released sometime in September, 2009. The reader is however advised to acquire and read the latest versions of the other<span style=""> </span></span><b style=""><span style="font-size: 11pt; font-family: Arial;" lang="EN-US">PRIMUS </span></b><span style="font-size: 11pt; font-family: Arial;" lang="EN-US">publications such as the <b style="">PRIMUS </b>Bar Star Notes, or the <b style="">PRIMUS </b>Cut and Paste which contain more detailed information leading to a more comprehensive Bar review.<span style=""> </span>Of course those who intend to take the 2009 Bar examination are encouraged to attend the <b style="">PRIMUS </b>2009 Wrap-up Reviews<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-family: Arial;" lang="EN-US"><span style=""> </span><o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 11pt; font-family: Arial;" lang="EN-US"><span style=""> </span>Although primarily for the use of Bar candidates who have attended the <b style="">PRIMUS </b>2008 Wrap-up Reviews, the “On-Liners” may be availed of by other students who are interested in the subject.<span style=""> </span>While available for the free use of all the contents of the </span><span style="font-size: 11pt; font-family: Arial;" lang="EN-US">“<b style="">PRIMUS</b> 2008<b style=""> ONE-LINERS</b>” </span><span style="font-size: 11pt; font-family: Arial;" lang="EN-US">are covered by copyright protection and should never be published (whether through printed media or through the internet) without written permission in writing from<span style=""> </span><b style="">PRIMUS </b>Information Center, Inc.<span style=""> </span>Downloading and printing into hard copies is allowed only for private use and should not be distributed on a commercial basis.<u><o:p></o:p></u></span></p> <p class="MsoTitle" style="text-align: justify;"><span style="font-size: 14pt;" lang="EN-US"><o:p> </o:p></span></p> <p class="MsoNormal"><span style="font-family: Arial;" lang="EN-US"><o:p> </o:p></span></p> <p class="MsoNormal" style="text-align: center;" align="center"><b style=""><u><span style="font-size: 14pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US">GENERAL PRINCIPLES OF TAXATION<o:p></o:p></span></u></b></p> <p class="MsoNormal"><b style=""><u><span style="font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><o:p><span style="text-decoration: none;"> </span></o:p></span></u></b></p> <p class="MsoNormal"><b style=""><u><span style="font-size: 12pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US">GENERAL CONCEPTS<o:p></o:p></span></u></b></p> <p class="MsoNormal" style="text-align: center;" align="center"><b style=""><u><span style="font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><o:p><span style="text-decoration: none;"> </span></o:p></span></u></b></p> <p class="MsoNormal" style="text-align: justify; text-indent: 0.3in;"><b style=""><span style="font-size: 12pt; font-family: Arial;" lang="EN-US"><span style=""> </span><span style=""> </span></span></b><b style=""><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">1.<span style=""> </span><span style=""> </span>What is the power to tax ?<span style=""> </span>Define the power to tax.<span style=""> </span>What is the concept of taxation, and its nature ? <o:p></o:p></span></b></p> <p class="MsoNormal" style="text-align: justify; text-indent: 0.3in;"><u><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">SUGGESTED ANSWER:</span></u><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>T<u>he</u> power to tax is an inherent power of the state exercised through the legislature imposing burdens upon subjects and objects within its jurisdiction to raise revenues in order to meet the legitimate objects of government.<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify; text-indent: 0.3in;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">It’s nature is that it is both an inherent power of government and an exercise of legislative power.<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify; text-indent: 0.3in;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">It is inherent in character because it could be exercised even in the absence of a constitutional grant.<span style=""> </span>It is an exercise legislative power because it is that department that promulgate rules and taxation is the promulgation of rules, such as how much tax is to be paid, who pays the tax, to whom should it be paid and when it should be paid.<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify; text-indent: 0.3in;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><o:p> </o:p></span></p> <p class="MsoNormal" style="text-align: justify; text-indent: 0.3in;"><b style=""><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US">2.<span style=""> </span>How should the power to tax be exercised ?<span style=""> </span>Explain briefly.<o:p></o:p></span></b></p> <p class="MsoNormal" style="text-align: justify; text-indent: 0.3in;"><u><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">SUGGESTED ANSWER:</span></u><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>The power of taxation is sometimes called also the power to destroy.<span style=""> </span><o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify; text-indent: 0.3in;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">Therefore, it should be exercised with caution to minimize injury to the proprietary rights of a taxpayer.<span style=""> </span>It must be exercised fairly, equally and uniformly, lest the tax collector kill the “hen that lays the golden egg.” And, in the order to maintain the general public’s trust and confidence in the Government this power must be used justly and not treacherously.<span style=""> </span></span><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>(<i>Roxas v. Court of Tax Appeals</i>, No. L-25043, </span><st1:date year="1968" day="26" month="4"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">April 26, 1968</span></st1:date><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">, 23 SCRA 276, 282. cited in <i style="">Pilipinas Shell Petroleum Corporation v. Commissioner of Internal Revenue, </i>G. R. No. 172598, </span><st1:date month="12" day="21" year="2007"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">December 21, 2007</span></st1:date><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">)<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify; text-indent: 0.3in;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><o:p> </o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><b style=""><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>3.<span style=""> </span>It is said that taxes are the lifeblood of the government and any delay in its collection would impair the rendition of government services.<span style=""> </span>May the collection of taxes be restrained by a court ?<span style=""> </span><o:p></o:p></span></b></p> <p class="MsoNormal" style="text-align: justify;"><b style=""><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span></span></b><u><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">SUGGESTED ANSWER:</span></u><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>As a general rule, “No court shall have the authority to grant an injunction to restrain the collection of any national internal revenue tax, fee or charge.”<span style=""> </span>(Sec. 218,<span style=""> </span>NIRC)<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>However, the Court of Tax Appeals is empowered to enjoin the collection of taxes through administrative remedies when collection could jeopardize the interest of the government or taxpayer.<span style=""> </span>(Sec. 11, Rep. Act No. 1125)<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><o:p> </o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span><b style="">4.<span style=""> </span>What is the procedure before the CTA for issuance of an order suspending the collection of taxes ? <span style=""> </span></b><u>SUGGESTED ANSWER:</u><span style=""> </span>Where the collection of the amount of the taxpayer’s liability, sought by means of a demand for payment, by levy, distraint or sale of property of the taxpayer, or by whatever means, as provided under existing laws, may jeopardize the interest of the government or the taxpayer, an interested party may file a motion for the suspension of the collection of the<span style=""> </span>tax liability (Sec. 1, Rule 10, RRCTA effective December 15, 2005) with the Court of Tax Appeals.<span style=""> </span><o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>The motion for suspension of the collection of the tax may be filed together with the petition for review or with the answer, or in a separate motion filed by the interested party at any stage of the proceedings.<span style=""> </span>(Sec. 3, Rule 10, RRCTA effective December 15, 2005)<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify; text-indent: 0.3in;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><o:p> </o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span><b style="">5. </b><span style=""> </span><span style=""> </span><b style="">How should tax exemptions be construed ?<o:p></o:p></b></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span><u>SUGGESTED ANSWER:</u><span style=""> </span>Tax exemptions are strictly construed against the taxpayer and liberally in favor of the State and must be clearly shown and based on language in the law too plain to be mistaken <i style="">(Davao Gulf Lumber Corporation v. Commissioner of Internal Revenue, et al., </i>293 SCRA 76, 88<i style="">),</i> because taxes are necessary for the continued existence of the State.<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><b style=""><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><o:p> </o:p></span></b></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span><b style="">6. </b><span style=""> </span><span style=""> </span><b style="">Why are tax laws construed strictly against the State and liberally in favor of the State ?<o:p></o:p></b></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span><u>SUGGESTED ANSWER</u>:<span style=""> </span>Taxes, as burdens which must be endured by the taxpayer, should not be presumed to go beyond what the law expressly and clearly declares.<span style=""> </span><i style="">(</i></span><st1:city><st1:place><i style=""><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US">Lincoln</span></i></st1:place></st1:city><i style=""><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"> Philippine Life Insurance Company, Inc., etc., v. Court of Appeals, et al., </span></i><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US">293 SCRA 92, 99)<i style=""><o:p></o:p></i></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><o:p> </o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span><b style="">7.<span style=""> </span>May a BIR ruling in favor of a taxpayer be reversed so as to subject a taxpayer to tax ?<span style=""> </span>Why ?<o:p></o:p></b></span></p> <p class="MsoNormal" style="text-align: justify;"><b style=""><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span></span></b><u><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US">SUGGESTED ANSWER:</span></u><b style=""><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span></span></b><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US">A reversal of a BIR ruling favorable to a taxpayer would not necessarily create a perpetual exemption in his favor, for after all the government is never estopped from collecting taxes because of mistakes or errors on the part of its agents. <i style="">(</i></span><st1:city><st1:place><i style=""><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US">Lincoln</span></i></st1:place></st1:city><i style=""><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"> Philippine Life Insurance Company, Inc., etc., v. Court of Appeals, et al., </span></i><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US">293 SCRA 92, 99)<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><o:p> </o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span><span style=""> </span><b style="">8.<span style=""> </span>In 1996 Rosemarie, a nonresident citizen, was collected Philippine income taxes on her incomes derived from sources without the </b></span><st1:country-region><st1:place><b style=""><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US">Philippines</span></b></st1:place></st1:country-region><b style=""><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US">.<span style=""> </span>Upon the enactment of the NIRC of 1997 which took effect on </span></b><st1:date month="1" day="1" year="1998"><b style=""><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US">January 1, 1998</span></b></st1:date><b style=""><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US">, she filed a claim for refund of the taxes she paid praying for the retroactive application of the provision that subjects nonresident citizens to tax only on their incomes from within.<span style=""> </span>Should the refund be granted ?<o:p></o:p></span></b></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span><u>SUGGESTED ANSWER:</u><span style=""> </span>No. Tax laws, unlike remedial laws, are not to be applied retroactively.<span style=""> </span>Revenue laws are substantive laws and their application must not be equated with remedial laws.<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span>Revenue laws are not intended to be liberally construed, and exemptions are not given retroactive application,<span style=""> </span>considering that taxes are the lifeblood of the government.<span style=""> </span>In Holmes’ memorable metaphor, the price we pay for civilization, tax laws must be faithfully and strictly implemented.<span style=""> </span>(<i style="">Commissioner of Internal Revenue v. Acosta, etc.,</i>G. R. No. 154068, </span><st1:date month="8" day="3" year="2007"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US">August 3, 2007</span></st1:date><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US">)<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><o:p> </o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><b style=""><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>9.<span style=""> </span>What are the purposes for the exercise of the taxing power ?<o:p></o:p></span></b></p> <p class="MsoNormal" style="text-align: justify;"><b style=""><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span></span></b><u><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">SUGGESTED ANSWER:</span></u><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span><b style="">The three purposes for the exercise of the taxing power</b> are:<span style=""> </span><o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>a.<span style=""> </span>the revenue purpose (also known as the primary purpose of taxation);<span style=""> </span><o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>b.<span style=""> </span>the sumptuary purpose (implementation of police power objectives);; and <o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>c.<span style=""> </span>the compensatory purpose.<i style=""><o:p></o:p></i></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><o:p> </o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><b style=""><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>10.<span style=""> </span>Explain briefly the revenue purpose of taxation.<o:p></o:p></span></b></p> <p class="MsoNormal" style="text-align: justify;"><b style=""><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span></span></b><u><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">SUGGESTED ANSWER:</span></u><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>One of the purposes of taxation is to raise revenues to meet the recognized objects of purposes of government.<span style=""> </span>Thus, is based the lifeblood theory which posits that the revenues collected constitute the lifeblood that animates the existence of governments, without which governments cannot perform the functions for which they were established.<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify; text-indent: 0.5in;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><o:p> </o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span><b style="">11.<span style=""> </span><span style=""> </span>What is the sumptuary purpose of taxation and upon which is it based ?<span style=""> </span>Explain briefly.<o:p></o:p></b></span></p> <p class="MsoNormal" style="text-align: justify;"><b style=""><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span></span></b><u><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">SUGGESTED ANSWER:</span></u><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>The sumptuary purpose of taxation is<span style=""> </span>to promote the general welfare and to protect the health, safety or morals of the inhabitants. It is in the joint exercise of the power of taxation and police power where regulatory taxes are collected.<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>Taxation may be made the implement of the state’s police power.<span style=""> </span>The motivation behind many taxation measures is the implementation of police power goals.<span style=""> </span>[<i style="">Southern Cross Cement Corporation v. Cement Manufacturers Association of the Philippines, et al., </i>G. R. No. 158540, August 3, 2005 citing <i style="">Lutz v. Araneta, </i>98 Phil. 148, 152 (1955); in turn citing <i style="">Great Atl. & Pac. Tea Co. v. Grosjean, </i>302 U.S. 412; <i style="">U.S. v. Biutler, </i>297 U.S. 1; <i style="">McCulloch v. Maryland,<span style=""> </span></i>4 Wheaton 316]<span style=""> </span>The reader should note that the </span><st1:date month="8" day="3" year="2005"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">August 3, 2005</span></st1:date><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"> <i style="">Southern Cross </i>case is the decision on the motion for reconsideration of the </span><st1:date month="7" day="8" year="2004"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">July 8, 2004</span></st1:date><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"> <i style="">Southern Cross </i>decision.<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>The so-called “sin taxes” on alcohol and tobacco manufacturers help dissuade the consumers from excessive intake of these potentially harmful products.<span style=""> </span>(<i style="">Southern Cross Cement Corporation v. Cement Manufacturers Association of the Philippines, et al., </i>G. R. No. 158540, August 3, 2005)<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span><b style=""><span style=""> </span></b><span style="letter-spacing: -0.1pt;"><o:p></o:p></span></span></p> <p class="MsoNormal" style="text-align: justify;"><b style=""><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>12.<span style=""> </span>Distinguish taxation from police power.<o:p></o:p></span></b></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span><u>SUGGESTED ANSWER:<o:p></o:p></u></span></p> <p class="MsoNormal" style="margin-left: 0in; text-align: justify; text-indent: 27pt;"><!--[if !supportLists]--><span style="font-size: 11pt; font-family: Arial;" lang="EN-US"><span style="">a.<span style="font-family: "Times New Roman"; font-style: normal; font-variant: normal; font-weight: normal; font-size: 7pt; line-height: normal; font-size-adjust: none; font-stretch: normal;"> </span></span></span><!--[endif]--><span dir="ltr"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>Purpose:<span style=""> </span>Taxation is for revenue while police power is for general welfare.<b style=""><o:p></o:p></b></span></span></p> <p class="MsoNormal" style="margin-left: 0in; text-align: justify; text-indent: 27pt;"><!--[if !supportLists]--><span style="font-size: 11pt; font-family: Arial;" lang="EN-US"><span style="">b.<span style="font-family: "Times New Roman"; font-style: normal; font-variant: normal; font-weight: normal; font-size: 7pt; line-height: normal; font-size-adjust: none; font-stretch: normal;"> </span></span></span><!--[endif]--><span dir="ltr"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>Amount:<span style=""> </span>In taxation, the amount of tax collected is<span style=""> </span>practically<span style=""> </span>unlimited while under police power, the license fee should not exceed cost of regulation.<o:p></o:p></span></span></p> <p class="MsoNormal" style="margin-left: 0in; text-align: justify; text-indent: 27pt;"><!--[if !supportLists]--><span style="font-size: 11pt; font-family: Arial;" lang="EN-US"><span style="">c.<span style="font-family: "Times New Roman"; font-style: normal; font-variant: normal; font-weight: normal; font-size: 7pt; line-height: normal; font-size-adjust: none; font-stretch: normal;"> </span></span></span><!--[endif]--><span dir="ltr"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>Compensation:<span style=""> </span>In taxation, the enjoyment of public services while in police power, the feeling of having done something good for society in general.<o:p></o:p></span></span></p> <p class="MsoNormal" style="margin-left: 0in; text-align: justify; text-indent: 27pt;"><!--[if !supportLists]--><span style="font-size: 11pt; font-family: Arial;" lang="EN-US"><span style="">d.<span style="font-family: "Times New Roman"; font-style: normal; font-variant: normal; font-weight: normal; font-size: 7pt; line-height: normal; font-size-adjust: none; font-stretch: normal;"> </span></span></span><!--[endif]--><span dir="ltr"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>Property taken:<span style=""> </span>In taxation, generally money while under police power, any property, other than money, which is the source of the danger health, safety or morals.<o:p></o:p></span></span></p> <p class="MsoNormal" style="margin-left: 0in; text-align: justify; text-indent: 27pt;"><!--[if !supportLists]--><span style="font-size: 11pt; font-family: Arial;" lang="EN-US"><span style="">e.<span style="font-family: "Times New Roman"; font-style: normal; font-variant: normal; font-weight: normal; font-size: 7pt; line-height: normal; font-size-adjust: none; font-stretch: normal;"> </span></span></span><!--[endif]--><span dir="ltr"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>What is done with the property taken: Taxation is constructive because the money collected is spent for building infrastructure or providing public services while police power is destructive.<span style=""> </span>The property taken is usually destroyed.<o:p></o:p></span></span></p> <p class="MsoNormal" style="margin-left: 0in; text-align: justify; text-indent: 27pt;"><!--[if !supportLists]--><span style="font-size: 11pt; font-family: Arial;" lang="EN-US"><span style="">f.<span style="font-family: "Times New Roman"; font-style: normal; font-variant: normal; font-weight: normal; font-size: 7pt; line-height: normal; font-size-adjust: none; font-stretch: normal;"> </span></span></span><!--[endif]--><span dir="ltr"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>Relation to the non-impairment clause:<span style=""> </span>Taxation is inferior to the non-impairment clause and could not override the same while police power is superior to the non-impairment clause.<o:p></o:p></span></span></p> <p class="MsoNormal" style="margin-left: 0in; text-align: justify; text-indent: 27pt;"><!--[if !supportLists]--><span style="font-size: 11pt; font-family: Arial;" lang="EN-US"><span style="">g.<span style="font-family: "Times New Roman"; font-style: normal; font-variant: normal; font-weight: normal; font-size: 7pt; line-height: normal; font-size-adjust: none; font-stretch: normal;"> </span></span></span><!--[endif]--><span dir="ltr"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>Scope.<span style=""> </span>Taxation interferes with property rights only while police power regulates both liberty and property.<o:p></o:p></span></span></p> <p class="MsoNormal" style="margin-left: 0in; text-align: justify; text-indent: 27pt;"><!--[if !supportLists]--><span style="font-size: 11pt; font-family: Arial;" lang="EN-US"><span style="">h.<span style="font-family: "Times New Roman"; font-style: normal; font-variant: normal; font-weight: normal; font-size: 7pt; line-height: normal; font-size-adjust: none; font-stretch: normal;"> </span></span></span><!--[endif]--><span dir="ltr"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>Surrender.<span style=""> </span>Taxation may be bargained away through a contract such that if the government issues a tax-exempt bond, it could not withdraw the exemption because it would violate the non-impairment clause while police power cannot be bargained away.<o:p></o:p></span></span></p> <p class="MsoNormal" style="text-align: justify; text-indent: 0.3in;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span><span style=""> </span><o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify; text-indent: 0.3in;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span><b style="">13.</b><span style=""> </span><b style="">What is the relation between the power of taxation and police power ?<span style=""> </span>Explain.<o:p></o:p></b></span></p> <p class="MsoNormal" style="text-align: justify; text-indent: 0.3in;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span><u>SUGGEWTED ANSWER:</u> The motivation behind many taxation measures is the implementation of police power goals. <o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify; text-indent: 0.3in;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>Progressive income taxes alleviate the margin between rich and poor; the so-called “sin-taxes” on alcohol and tobacco manufacturers help dissuade the consumers from excessive intake of these potentially harmful products.<span style=""> </span><o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify; text-indent: 0.3in;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>Taxation is distinguishable from police power as to the means employed to implement these public good goals.<span style=""> </span>Those doctrines that are unique to taxation arose from peculiar considerations such as those especially punitive effects of taxation, and the belief that taxes are the lifeblood of the state. <o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify; text-indent: 0.3in;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>These considerations necessitated the evolution of taxation as a distinct legal concept from police power.<span style=""> </span>Yet at the same time, it has been recognized that taxation may be made the implement of the state’s police power.<span style=""> </span>[<i style="">Southern Cross Cement Corporation v. Cement Manufacturers Association of the Philippines, et al., </i>G. R. No. 158540, August 3, 2005 citing <i style="">Lutz v. Araneta, </i>98 Phil. 148, 152 (1955) in turn citing <i style="">Great Atl.,& Pac. Tea Co. v. Grosjean, </i>301 U.S. 412, <i style="">U.S. v. Butler, </i>297 U.S. 1; <i style="">McCulloch v. Maryland, </i>4 Wheaton 316]<u><o:p></o:p></u></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><o:p> </o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><b style=""><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>14.<span style=""> </span><span style=""> </span>What are the similarities between the power of taxation and police power ?</span></b><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span><u>SUGGESTED ANSWER:<o:p></o:p></u></span></p> <p class="MsoNormal" style="text-align: justify;"><b style=""><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span><span style=""> </span></span></b><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">a.<span style=""> </span><span style=""> </span>Both are inherent in the State and may be exercised even if there is no specific authority granted by the Constitution.<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span><span style=""> </span><span style=""> </span>b.<span style=""> </span><span style=""> </span>Without these powers the State could not attain the purposes for which it is established.<span style=""> </span>Otherwise stated, the very existence of the State is dependent upon the exercise of these powers.<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span><span style=""> </span>c.<span style=""> </span><span style=""> </span>The powers are to be exercised by the legislative department.<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span><span style=""> </span>d.<span style=""> </span><b style=""><span style=""> </span></b>Both interfere with ownership and use of private property.<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><o:p> </o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><b style=""><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span>15.<span style=""> </span><span style=""> </span>What is the nature of the Sugar Adjustment Act which increased the existing taxes on sugar ?<span style=""> </span>Explain briefly.<o:p></o:p></span></b></p> <p class="MsoNormal" style="text-align: justify;"><b style=""><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span></span></b><u><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US">SUGGESTED ANSWER:</span></u><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span>The Sugar Adjustment Act which increased existing taxes on sugar was enacted to stabilize the sugar industry to prepare it for the loss of its quota in<span style=""> </span>the U.S. market was levied for a regulatory purpose to protect and promote the sugar industry which is also for a public purpose. <b style=""><span style=""> </span></b>(L<i style="">utz v. Araneta, </i>98 Phil. 148)<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span>The Philsugin fund, an imposition on sugar, to raise funds to conduct research for the improvement of the sugar industry, is for the purpose of stabilizing the sugar industry which one of the pillars of the Philippine economy which affects the welfare of the State.<span style=""> </span>The levy is not so much an exercise of the power of taxation, nor the imposition of a special levy, but the exercise of police power which is for the general welfare of the entire country, therefore for a public purpose.<span style=""> </span><i style="">(Republic v. Bacolod-Murcia Co., et al</i>., G.R. No. L-19824, July 9, 1966)<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><o:p> </o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span><b style="">16.<span style=""> </span>Section 40 (g) of the Public Service Act authorizes the collection of “x x x fees as reimbursement of its expenses in the authorization, supervision and/or regulation of the public services: x x x g) For each permit, authorizing the increase in equipment, the installation of new units or authorizing the increase of capacity, or the extension of means or general extensions in the services, twenty centavos for each one hundred pesos or fraction of the additional capital necessary to<span style=""> </span>carry out the permit.”<span style=""> </span>(paraphrasing supplied)<o:p></o:p></b></span></p> <p class="MsoNormal" style="text-align: justify;"><b style=""><i style=""><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span></span></i></b><b style=""><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US">Is the imposition a tax measure ?<span style=""> </span>Explain.<o:p></o:p></span></b></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span><u>SUGGESTED ANSWER:</u><span style=""> </span>No.<span style=""> </span>It is not a tax measure but a simple regulatory provision for the collection of fees imposed pursuant to the exercise of the State’s police power.<span style=""> </span>A tax is imposed under the taxing power of government principally for the purpose of raising revenues. The law in question, however, merely authorizes and requires the collection of fees for the reimbursement of the Commission’s expenses in the authorization, supervision and/or regulation of public services.<span style=""> </span>(<i style="">Republic, etc., v. International Communications Corporation (ICC), </i>G. R. No. 141667, July 17, 2006)<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><o:p> </o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span><b style="">17.<span style=""> </span>Explain the compensatory purpose of taxation. <span style=""> </span></b><u>SUGGESTED ANSWER:</u><span style=""> </span>The compensatory purpose of taxation is to implement the social justice provisions of the constitution through the progressive system of taxation, which would result to equal distribution of wealth, etc.<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span>Progressive income taxes alleviate the margin between rich and poor.<span style=""> </span>(<i style="">Southern Cross Cement Corporation v. Cement Manufacturers Association of the Philippines, et al., </i>G. R. No. 158540, August 3, 2005)<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span><o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><b style=""><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span>18.<span style=""> </span>May the power of taxation be used to implement the power of<span style=""> </span>eminent domain ?<span style=""> </span>Explain.<span style=""> </span><o:p></o:p></span></b></p> <p class="MsoNormal" style="text-align: justify;"><b style=""><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span></span></b><u><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US">SUGGESTED ANSWER:</span></u><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span>Yes. The power of taxation can also be used to implement power<span style=""> </span>of eminent domain. Tax measures are but ”enforced contributions exacted on pain of penal sanctions” and “clearly imposed for public purpose.”<span style=""> </span>In most recent years, the power to tax has indeed become a most effective tool to realize social justice, public welfare, and the equitable distribution of wealth.<span style=""> </span>(<i style="">Commissioner of Internal Revenue v. Central Luzon Drug Corporation, </i>G.R. No. 159647, </span><st1:date month="4" day="16" year="2005"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US">April 16, 2005</span></st1:date><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US">)<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><o:p> </o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span><span style=""> </span><b style="">19.</b><span style=""> </span><b style="">The senior citizens’ discount.</b><span style=""> </span></span><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">The senior citizens shall be entitled to the <span style="letter-spacing: -0.1pt;">“</span>grant of twenty percent (20%) discount from all establishments relative to the utilization of services in hotels and similar lodging establishments, restaurants and recreation centers, and purchase of medicines in all establishments for the exclusive use or enjoyment of senior citizens,”<span style=""> </span><span style="letter-spacing: -0.1pt;">[Expanded Senior Citizens Act of 2003, Sec. 4 (a)]<o:p></o:p></span></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><o:p> </o:p></span></p> <p class="MsoFootnoteText" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span></span><b style=""><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">20.<span style=""> </span>The Senior Citizens Act is a legitimate exercise of police power. </span></b><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">The law is a legitimate exercise of police power which, similar to the power of eminent domain, has general welfare for its object</span><i style=""><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"> </span></i><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US">(<i style="">Carlos Superdrug Corp., etc., et al, </i>G. R. No. 166494, June 29, 2007</span><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">) <o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span><b style="">21.</b><span style=""> </span><b style="">Senior citizens’ discount not allowed anymore as a tax credit but as a deduction from gross income.</b><span style=""> </span></span><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">It ought to be noted, however, that on February 26, 2004, RA 9257, or The Expanded Senior Citizens Act of 2003, amending RA 7432, was signed into law, ushering in, upon its effectivity on March 21, 2004, a new tax treatment for sales discount purchases of qualified senior citizens of medicines.<span style=""> </span><span style="letter-spacing: -0.1pt;"><o:p></o:p></span></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span></span><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">The establishment may claim the discounts granted to senior citizens <b style="">as <span style="">tax deduction</span></b> based on the net cost of the goods sold or services rendered: <i>Provided</i>, That the cost of the discount shall be allowed as deduction from gross income for the same taxable year that the discount is granted. <i>Provided, further, </i>That the total amount of the claimed tax deduction net of value added tax if applicable, shall be included in their gross sales receipts for tax purposes and shall be subject to proper documentation and to the provisions of the National Internal Revenue Code, as amended. <span style="letter-spacing: -0.1pt;">[<i style="">M.E. Holding Corporation<span style=""> </span>v. Court of Appeals, et al., </i>G.R. No. 160193, </span></span><st1:date month="3" day="3" year="2008"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US">March 3, 2008</span></st1:date><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"> citing Expanded Senior Citizens Act of 2003, Sec. 4 (a)]<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><o:p> </o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><b style=""><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>22.</span></b><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span><b style="">Just compensation, defined. </b><span style=""> </span>The full and fair equivalent of the property taken from its owner by the expropriator. The measure is not the taker’s gain but the owner’s loss. The word <b><span style="">just</span> </b>is used to intensify the meaning of the word <b>compensation</b>, and to convey the idea that the equivalent to be rendered for the property to be taken shall be real, substantial, full and ample. (</span><i style=""><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US">Carlos Superdrug Corp., etc., et al, </span></i><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US">G. R. No. 166494, </span><st1:date month="6" day="29" year="2007"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US">June 29, 2007</span></st1:date><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US">)<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><o:p> </o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><b style=""><u><span style="font-size: 12pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US">THE LIMITATIONS ON THE EXERCISE<o:p></o:p></span></u></b></p> <p class="MsoNormal" style="text-align: justify;"><b style=""><u><span style="font-size: 12pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US">OF THE POWER OF TAXATION; GROUNDS<o:p></o:p></span></u></b></p> <p class="MsoNormal" style="text-align: justify;"><b style=""><u><span style="font-size: 12pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US">FOR THE NULLIFICATION OF TAX MEASURES<o:p></o:p></span></u></b></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><o:p> </o:p></span></p> <p class="MsoFootnoteText" style="text-align: justify;"><b style=""><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>1.<span style=""> </span>What criteria should be used by the judiciary in quashing a legislative act ?<o:p></o:p></span></b></p> <p class="MsoFootnoteText" style="text-align: justify;"><b style=""><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span></span></b><u><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">SUGGESTED ANSWER:</span></u><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span><b style=""><span style=""> </span></b>Subject to the determination of the courts as to what is a proper exercise of police power using the due process clause and the equal protection clause as yardsticks, <span style="">the</span> State may <span style="">interfere wherever the public interests demand it, and in this particular a large discretion is necessarily vested in the legislature to determine, not only what interests of the public require, but what measures are necessary for the protection of such interests<i> </i>[</span><i style=""><span style="letter-spacing: -0.1pt;">Carlos Superdrug Corp., etc., et al, </span></i><span style="letter-spacing: -0.1pt;">G. R. No. 166494, June 29, 2007 citing </span><i>U.S. v. Toribio, </i>15 Phil.85 at 98 (1910) in turn citing<i> Lawton v. Steele, 152 U.S. 133,136; Barbier v. Connoly, 113 U.S. 27; Kidd v. Pearson, 128 U.S. 1</i><span style="">]<o:p></o:p></span></span></p> <p class="MsoFootnoteText" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><o:p> </o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><b style=""><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span>2.<span style=""> </span>What is meant by a taxpayer’s suit ?<o:p></o:p></span></b></p> <p class="MsoNormal" style="text-align: justify;"><b style=""><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span></span></b><u><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US">SUGGESTED ANSWER:</span></u><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span>A taxpayers’ suit is a case where the act complained of directly involves the illegal disbursement of public funds derived from taxation.<span style=""> </span>(Justice Melo, dissenting in <i style="">Kilosbayan, Inc. v. Guingona, Jr</i>., 232 SCRA 110)<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><b style=""><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><o:p> </o:p></span></b></p> <p class="MsoNormal" style="text-align: justify; text-indent: 0.4in;"><b style=""><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US">3.<span style=""> </span> What is <i style="">locus standi ?</i><span style=""> </span><o:p></o:p></span></b></p> <p class="MsoNormal" style="text-align: justify; text-indent: 0.4in;"><u><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US">SUGGESTED ANSWER</span></u><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US">:<span style=""> </span><i style="">Locus standi </i>is “a right of appearance in a court of justice on a given question.<span style=""> </span>(<i style="">Abaya v. Ebdane, </i>G. R. No. 167919, </span><st1:date month="2" day="14" year="2007"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US">February 14, 2007</span></st1:date><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US">)<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify; text-indent: 0.4in;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US">It is a party’s personal and substantial interest in the case, such that the party has sustained or will sustain (<i style="">Ibid.</i>)direct injury as a result of the government act being challenged. It calls for more than just a generalized grievance. <o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify; text-indent: 0.4in;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US">A party need not be a party to the contract to challenge its validity.<span style=""> </span>(<i style="">Ibid.</i>)<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify; text-indent: 0.4in;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><o:p> </o:p></span></p> <p class="MsoNormal" style="text-align: justify; text-indent: 0.4in;"><b style=""><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US">4.</span></b><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span><b style="">Rationale for <i style="">locus standi</i>.<i style=""><span style=""> </span></i></b>The rationale for requiring a party who challenges the constitutionality of a statute to allege such a personal stake in the outcome of the controversy is “to ensure that a concrete adverseness which sharpens the presentation of issues upon which the court so largely depends for illumination of different constitutional questions.”<span style=""> </span>(<i style="">Abaya v. Ebdane, </i>G. R. No. 167919, </span><st1:date month="2" day="14" year="2007"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US">February 14, 2007</span></st1:date><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US">)<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify; text-indent: 0.4in;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><o:p> </o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span><b>5</b></span><b><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">.<span style=""> </span>What</span></b><b style=""><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"> are the requirements that must be met before taxpayers, concerned citizens and legislators may be accorded standing to sue ?</span></b><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span><o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span><u>SUGGESTED ANSWER:<o:p></o:p></u></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>a.<span style=""> </span>The case should involve constitutional issues;<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>b.<span style=""> </span>For taxpayers, there must be a claim of illegal disbursement of public funds or that the tax measure is unconstitutional.<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>c.<span style=""> </span>For voters, there must be a showing of obvious interest in the validity of the election law in question.<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>d.<span style=""> </span>For concerned citizens, there must be a showing that the issues raised are of transcendental importance which must be settled early.<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>e.<span style=""> </span>For legislators, there must be a claim that the official action complained of infringes upon their prerogatives as legislators.<span style=""> </span></span><span style="font-size: 10.5pt; font-family: Arial;" lang="ES-TRAD">(<i style="">David, et al., v. President Gloria Macapagal-Arroyo, etc., et al., </i>G. R. No. 171396, May 3, 2006)<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="ES-TRAD"><span style=""> </span><o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="ES-TRAD"><span style=""> </span><b style="">6.</b></span><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"> <span style=""> </span><b style="">Requisites for challenging constitutionality of law.</b><span style=""> </span>The party bringing suit must show “not only that the law or act is invalid, but also that he has sustained or is in immediate, or imminent danger of sustaining some direct injury as a result of its enforcement and not merely that he suffers thereby in some indefinite way.”<span style=""> </span></span><span style="font-size: 10.5pt; font-family: Arial;" lang="ES-TRAD">(<i style="">Soriano III v. Lista, et al.,</i> G. R. No. 153881, March 24, 2003)<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="ES-TRAD"><o:p> </o:p></span></p> <p class="MsoNormal" style="text-align: justify; text-indent: 0.4in;"><b style=""><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US">7.</span></b><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span><b style="">Alternative statement of doctrine of brushing aside <i style="">locus standi.</i><span style=""> </span></b>In cases of paramount importance where serious constitutional questions are involved, the standing requirements may be relaxed and a suit may be allowed to prosper even where there is no direct injury to the party claiming the right of judicial review.<span style=""> </span>[<i style="">Coconut Oil Refiners Association, Inc., etc., et al., vs. Torres, etc., et al., </i>G. R. No. 132527, July 29, 2005 citing <i style="">Bayan (Bagong Alyansang Makabayan) v. Zamora,<span style=""> </span></i>G. R. No. 138570, October 10, 2000, 342 SCRA 449, in turn citing <i style="">Kilosbayan, Inc. v. Guingona, Jr</i>., G. R. No. 113375, May 5, 1994,<span style=""> </span>232 SCRA 110]<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="ES-TRAD"><o:p> </o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><b style=""><i style=""><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="ES-TRAD"><span style=""> </span></span></i></b><b style=""><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US">8.<span style=""> </span>Locus standi being merely a matter of procedure, have been waived in certain instances where a party who is not personally injured may be allowed to bring suit.<span style=""> </span>Give some examples.<o:p></o:p></span></b></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span><u>SUGGESTED ANSWER</u>:<span style=""> </span>The following are examples of instances where suits have been brought by parties who have not have been personally injured by the operation of a law or any other government act but by concerned citizens, taxpayers or voters who actually sue in the public interest:<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span>a.<span style=""> </span>Taxpayer’s suits to question contracts entered into by the national government or government-owned or controlled corporations allegedly in contravention of the law.<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify; text-indent: 0.4in;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US">b.<span style=""> </span>A taxpayer is allowed to sue where there is a claim that public funds are illegally disbursed, or that public money is being deflected to any improper purpose, or that there is a wastage of public funds through the enforcement of an invalid or unconstitutional law.<span style=""> </span>(<i style="">Abaya v. Ebdane, </i>G. R. No. 167919, </span><st1:date month="2" day="14" year="2007"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US">February 14, 2007</span></st1:date><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US">)<o:p></o:p></span></p> <p class="MsoFootnoteText" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><o:p> </o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><b style=""><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>9.<span style=""> </span>What is the rationale behind the inherent and constitutional limitations on the power of taxation ?<o:p></o:p></span></b></p> <p class="MsoNormal" style="text-align: justify;"><b style=""><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span></span></b><u><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">SUGGESTED ANSWER:</span></u><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>The inherent and constitutional limitations to the power of taxation are safeguards which would prevent abuse in the exercise of this otherwise unlimited and plenary power.<o:p></o:p></span></p> <p class="MsoNormal" style=""><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><o:p> </o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span><b style="">10.<span style=""> </span>What are the inherent limitations upon the power of taxation ?<o:p></o:p></b></span></p> <p class="MsoNormal" style="text-align: justify;"><b style=""><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span></span></b><u><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">SUGGESTED ANSWER:</span></u><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>The inherent limitatio<b style="">ns</b> are <o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>a.<span style=""> </span>Public purpose.<span style=""> </span>The revenues collected from taxation should be devoted to a public purpose.<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>b.<span style=""> </span><span style=""> </span>No improper delegation of legislative authority to tax.<span style=""> </span>Only the legislature can exercise the power of taxes unless the same is delegated to some other governmental body by the constitution or through a law which does not violate any provision of the constitution.<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>c.<span style=""> </span>Territoriality.<span style=""> </span>The taxing power should be exercised only within territorial boundaries of the taxing authority.<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>d.<span style=""> </span>Recognition of government exemptions; and <o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>e.<span style=""> </span>Observance of the principle of comity.<span style=""> </span>Comity is the respect accorded by nations to each other because they are equals.<span style=""> </span>On the other hand taxation is an act of sovereign. Thus, the power should be imposed upon equals out of respect.<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>Some authorities include no double taxation.<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><o:p> </o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span><b style="">11.<span style=""> </span>What are some of the principles to consider in the determination of whether tax revenues are devoted for a public purpose ?<o:p></o:p></b></span></p> <p class="MsoNormal" style="text-align: justify;"><b style=""><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span></span></b><u><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">SUGGESTED ANSWER:<o:p></o:p></span></u></p> <p class="MsoNormal" style="text-align: justify;"><b style=""><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>a.<span style=""> </span>The tax revenues are for a public purpose if<span style=""> </span>utilized for the benefit of the community in general.</span></b><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>An alternative meaning is<span style=""> </span>that tax proceeds should be utilized only to attain the objectives of government.<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify; text-indent: 0.3in;"><b style=""><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>b.<span style=""> </span>Public use is no longer confined to the traditional notion of use by the public</span></b><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"> but held synonymous with public interest, public benefit, public welfare, and public convenience. (<i style="">Commissioner of Internal Revenue v. Central Luzon Drug Corporation, </i>G.R. No. 159647, </span><st1:date month="4" day="16" year="2005"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">April 16, 2005</span></st1:date><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">)<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><b style=""><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span>c.<span style=""> </span>The tax revenues are for a public purpose if<span style=""> </span>utilized for the benefit of the community in general.</span></b><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span>An alternative meaning is<span style=""> </span>that tax proceeds should be utilized only to attain the objectives of government.<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify; text-indent: 0.3in;"><b style=""><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span></span></b><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US">Public use is no longer confined to the traditional notion of use by the public but held synonymous with public interest, public benefit, public welfare, and public convenience. (<i style="">Commissioner of Internal Revenue v. Central Luzon Drug Corporation, </i>G.R. No. 159647, </span><st1:date month="4" day="16" year="2005"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US">April 16, 2005</span></st1:date><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US">)<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify; text-indent: 0.3in;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><o:p> </o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span><b style="">12.<span style=""> </span>The petitioners impugn the validity of the establishment of tax and duty-free shops<span style=""> </span>within the Subic Special Economic Zone (SSEZ) and the removal of consumer goods and items from the zones without payment of corresponding duties and taxes for the reason that this constitute executive legislation in violation of the rule on separation of powers, that only “raw material, capital and equipment” should be allowed the privilege.<span style=""> </span>Rule on the objections and reason out your answer briefly.<o:p></o:p></b></span></p> <p class="MsoBodyText" style="margin-bottom: 0.0001pt; text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span><u>SUGGESTED ANSWER</u>:<span style=""> </span>The objections should not be given credence.<span style=""> </span>It is legal to setup duly authorized duty-free shops in the SSEZ to sell tax and duty-free consumer items in the Secured Area.<span style=""> </span>This is in line with the policy enunciated in the law that “the </span><st1:place><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US">Subic</span></st1:place><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"> Special Economic Zone shall be developed into a self-sustaining, industrial, commercial, financial and investment center to generate employment opportunities in and around the zone and to attract and promote productive foreign investments.”<o:p></o:p></span></p> <p class="MsoBodyText" style="margin-bottom: 0.0001pt; text-align: justify; text-indent: 0.4in;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span>While it is true that Section 12 (b) of Rep. Act No. 7227 mentions only raw materials, capital and equipment, this does not necessarily mean that the tax and duty free buying privilege is limited to these types of articles to the exclusion of consumer goods.<o:p></o:p></span></p> <p class="MsoBodyText" style="margin-bottom: 0.0001pt; text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span>It must be remembered that in construing statutes, the proper course is to start out and follow the true intent of the Legislature and to adopt that sense which harmonizes best with the context and promotes to the fullest manner the policy and objects of the Legislature.<o:p></o:p></span></p> <p class="MsoBodyText" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span>The concept of <i style="">inclusio unius est exclusio alterius </i>does not find application because the phrase “tax and duty-free importations of raw materials, capital and equipment” was merely cited as an example of incentives that the SSEZ is authorized to grant, in line with its being a free port zone.<span style=""> </span>Thus, the legislative intent is that consumer goods entering the SSEZ which satisfy the needs of the zone and are consumed there are not subject to duties and taxes in accordance with Philippine law.<span style=""> </span>(<i style="">Coconut Oil Refiners Association, Inc., etc., et al., v. Torres, etc., et al., </i>G. R. No. 132527, July 29, 2005)<o:p></o:p></span></p> <p class="MsoBodyText" style="margin-bottom: 0.0001pt; text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US">`<b style=""><span style=""> </span>Would your answer be the same if a Presidential Proclamation allowed for the limited withdrawal from the Clark Special Economic Zone or the John Hay Economic Zone of consumer goods tax and duty-free ?<o:p></o:p></b></span></p> <p class="MsoBodyText" style="margin-bottom: 0.0001pt; text-align: justify; text-indent: 0.4in;"><u><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US">SUGGESTED ANSWER</span></u><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US">:<span style=""> </span>The answer would not be the same.<span style=""> </span>This time the Presidential Proclamation would be invalid as the statutory<span style=""> </span>tax exempt privilege was granted only to the Subic Special Economic Zone and not to John Hay or Clark.<span style=""> </span>This is so because the Constitution mandates that no law granting tax exemption shall be passed without the concurrence of a majority of all the members of Congress.<span style=""> </span>(<i style="">Coconut Oil Refiners Association, Inc., etc., et al., v. Torres, etc., et al., </i>G. R. No. 132527, July 29, 2005 citing <i style="">John Hay People’s Alternative Coalition, et al., v. Lim, etc., et al., </i>G.R. No. 119775, October 24, 2003, 414 SCRA 356)<o:p></o:p></span></p> <p class="MsoBodyText" style="margin-bottom: 0.0001pt; text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span>Furthermore, the law is very clear that the “exportation or removal of goods from the territory of the Subic Special Economic Zone to other parts of the Philippine territory shall be subject to customs duties and taxes under the Customs and Tariff Code and other relevant tax laws of the Philippines.” (<i style="">Ibid.</i>)<o:p></o:p></span></p> <p class="MsoBodyText" style="margin-bottom: 0.0001pt; text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><o:p> </o:p></span></p> <p class="MsoBodyText" style="margin-bottom: 0.0001pt; text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span><b style="">13.<span style=""> </span>The VAT law provides that, the President, upon the recommendation of the Secretary of Finance, shall, effective January 1, 2006, raise the rate of value-added tax to twelve percent (12%) after any of the following conditions have been satisfied. “(i)<span style=""> </span>value-added tax collection as a percentage of Gross Domestic Product (GDP) of the previous year exceeds two and four-fifth percent (2 4/5%) or (ii)<span style=""> </span>national government deficit as a percentage of GDP of the previous year exceeds one and one-half percent (1 ½%).”<o:p></o:p></b></span></p> <p class="MsoBodyText" style="margin-bottom: 0.0001pt; text-align: justify;"><b style=""><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span>Was there an invalid delegation of legislative power ?<o:p></o:p></span></b></p> <p class="MsoBodyText" style="margin-bottom: 0.0001pt; text-align: justify;"><b style=""><i style=""><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span></span></i></b><u><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US">SUGGESTED ANSWER</span></u><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US">:<span style=""> </span>No.<span style=""> </span>There is no undue delegation of legislative power but only of the discretion as to the execution of the law.<span style=""> </span>This is constitutionally permissible.<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span>Congress does not abdicate its functions or unduly delegate power when it describes what job must be done, who must do it, and what is the scope of his authority.<span style=""> </span>In the above case the Secretary of Finance becomes merely the agent of the legislative department, to determine and declare the even upon which its expressed will takes place.<span style=""> </span>The President cannot set aside the findings of the Secretary of Finance, who is not under the conditions acting as the execute alter ego or subordinate.<span style=""> </span>.<span style=""> </span>[<i style="">Abakada Guro Party List (etc.) v. Ermita, etc., et al., </i>G. R. No. 168056, September 1, 2005 and companion cases citing various cases]]<o:p></o:p></span></p> <p class="MsoBodyText" style="margin-bottom: 0.0001pt; text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><o:p> </o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><b style=""><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span>14.<span style=""> </span>Juliane a non-resident alien appointed as a commission agent by a domestic corporation with a sales commission of 10% all sales actually concluded and collected through her efforts.<span style=""> </span>The local company withheld the amount of P107,000 from her sales commission and remitted the same to the BIR.<o:p></o:p></span></b></p> <p class="MsoNormal" style="text-align: justify;"><b style=""><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span>She filed a claim for refund alleging that her sales commission is not taxable because the same was a compensation for her services rendered in Germany and therefore considered as income from sources outside the Philippines.<o:p></o:p></span></b></p> <p class="MsoNormal" style="text-align: justify;"><b style=""><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span>Is her contention correct ?<o:p></o:p></span></b></p> <p class="MsoNormal" style="text-align: justify;"><b style=""><i style=""><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span></span></i></b><u><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US">SUGGESTED ANSWER</span></u><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US">:<span style=""> </span>Yes.<span style=""> </span>The important factor which determines the source of income of personal services is not the residence of the payor, or the place where the contract for service is entered into, or the place of payment, but the place where the services were actually performed.<b style=""><i style=""> <o:p></o:p></i></b></span></p> <p class="MsoNormal" style="text-align: justify;"><b style=""><i style=""><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span></span></i></b><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US">Since the activity of securing the sales were in Germany, then the income did not originate from sources from within the Philippines.<span style=""> </span>(<i style="">Commissioner of Internal Revenue v. Baier-Nickel, </i>G. R. No. 153793, August 29, 2006)<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span><o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><b style=""><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span>15.<span style=""> </span>A domestic insurance company decided to reinsure with a foreign reinsurer the risks it has undertaken with its local clients.<span style=""> </span>The foreign reinsurer does not have an office, neither does it do business in the Philippines.<span style=""> </span>Are the reinsurance premiums subject to Philippine income taxation ?<o:p></o:p></span></b></p> <p class="MsoNormal" style="text-align: justify;"><b style=""><i style=""><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span></span></i></b><u><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US">SUGGESTED ANSWER</span></u><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US">:<span style=""> </span>Yes because the undertaking of the foreign insurance company to indemnify the local insurance company is the activity that produced the income.<span style=""> </span><o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span>The reinsurance premiums remitted to the foreign reinsurer had for their source the undertaking to indemnify the local insurer against liability.<span style=""> </span>Said undertaking is the activity that produced there insurance premiums, and the same took place in the Philippines.<span style=""> </span>The reinsured, the liabilities insured and the risk originally undertaken by the local insurance company, upon which the reinsurance premiums and indemnity were based, were all situated in the Philippines.<span style=""> </span>(<i style="">Alexander Howden & Co., Ltd. v. Collector of Internal Revenue, </i>121 Phil. 579; 13 SCRA 601 (1965) cited in <i style="">Baier-Nickel)</i> <o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><o:p> </o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span><b style="">16.<span style=""> </span>BOAC, a foreign airline company which does not maintain any flight to and from the Philippines sold air tickets in the Philippines, through a general sales agent, relating to the carriage of passengers and cargo between two points, both outside the Philippines.<o:p></o:p></b></span></p> <p class="MsoNormal" style="text-align: justify;"><b style=""><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span>Is BOAC subject to income taxes on the sale of the tickets ?<o:p></o:p></span></b></p> <p class="MsoNormal" style="text-align: justify;"><b style=""><i style=""><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span></span></i></b><u><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US">SUGGESTED ANSWER</span></u><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US">:<span style=""> </span>Yes.<span style=""> </span>The source of income which is taxable is that “activity” which produced the income.<span style=""> </span>The ”sale of tickets” in the Philippines is the activity that determines whether such income is taxable in the Philippines.<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span>The tickets exchanged hands here and payments for fares were also made here in Philippine currency.<span style=""> </span>The situs of the source of payments is the Philippines.<span style=""> </span>the flow of wealth proceeded from and occurred, within the Philippine territory, enjoying the protection accorded by the Philippine Government. In consideration of such protection, the flow of wealth should share the burden of supporting the government.<span style=""> </span>(<i style="">Commissioner of Internal Revenue v. British Overseas Airways Corporation (BOAC), </i>149 SCRA 395 cited in <i style=""><span style=""> </span>Bauer-Nickel)<o:p></o:p></i></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span><o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span><span style=""> </span><b style="">17.<span style=""> </span>Give some of the general or indirect constitutional limitations.<o:p></o:p></b></span></p> <p class="MsoNormal" style="text-align: justify;"><b style=""><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span></span></b><u><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">SUGGESTED ANSWER:</span></u><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>The general or indirect constitutional limitations are the following:<o:p></o:p></span></p> <p class="MsoNormal" style=""><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>a.<span style=""> </span><span style=""> </span>Due process clause;<o:p></o:p></span></p> <p class="MsoNormal" style=""><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>b.<span style=""> </span><span style=""> </span>Equal protection clause;<o:p></o:p></span></p> <p class="MsoNormal" style=""><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>c.<span style=""> </span><span style=""> </span>Freedom of the press;<o:p></o:p></span></p> <p class="MsoNormal" style=""><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>d.<span style=""> </span><span style=""> </span>Religious freedom;<o:p></o:p></span></p> <p class="MsoNormal" style=""><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>e.<span style=""> </span><span style=""> </span>No taking of private property without just compensation;<o:p></o:p></span></p> <p class="MsoNormal" style=""><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>f. <span style=""> </span>Non-impairment clause;<o:p></o:p></span></p> <p class="MsoNormal" style=""><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>g. <span style=""> </span>Law-making process:<o:p></o:p></span></p> <p class="MsoNormal" style=""><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>1)<span style=""> </span>Bill should embrace only one subject expressed in the title <o:p></o:p></span></p> <p class="MsoNormal" style="text-indent: 0.5in;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>thereof;<o:p></o:p></span></p> <p class="MsoNormal" style=""><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>2)<span style=""> </span>Three (3) readings on three separate days;<o:p></o:p></span></p> <p class="MsoNormal" style=""><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>3)<span style=""> </span>Printed copies in final form distributed three (3) days before <o:p></o:p></span></p> <p class="MsoNormal" style=""><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>passage.<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>h.<span style=""> </span>Presidential power to grant reprieves, commutations and pardons and remittal of fines and forfeiture after conviction by final judgment.<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span><o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><b style=""><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">18.<span style=""> </span>The specific or direct constitutional limitations are the following:<o:p></o:p></span></b></p> <p class="MsoNormal" style=""><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>a.<span style=""> </span>No imprisonment for non-payment of a poll tax;<o:p></o:p></span></p> <p class="MsoNormal" style=""><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>b.<span style=""> </span>Taxation shall be uniform and equitable;<o:p></o:p></span></p> <p class="MsoNormal" style=""><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>c.<span style=""> </span>Congress shall evolve a progressive system of taxation;<o:p></o:p></span></p> <p class="MsoNormal" style=""><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>d.<span style=""> </span>All appropriation, revenue or tariff bills shall originate exclusively in the House of Representatives, but the Senate may propose and concur with amendments;<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>e.<span style=""> </span>The President shall have the power to veto any particular item or items in an appropriation, revenue, or tariff bill, but the veto shall not affect the item or items to which he does not object;<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>f.<span style=""> </span>Delegated power of the President to impose tariff rates, import and export quotas, tonnage and wharfage dues:<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>1)<span style=""> </span>Delegation by Congress<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>2)<span style=""> </span>Through a law<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>3)<span style=""> </span>Subject to Congressional limits and restrictions<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>4)<span style=""> </span>Within the framework of national development program.<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>g.<span style=""> </span>Tax exemption of charitable institutions, churches, parsonages and convents appurtenant thereto, mosques, and all lands, buildings and improvements of all kinds actually, directly and exclusively used for religious, charitable or educational purposes;<b style=""><o:p></o:p></b></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>h.<span style=""> </span>No tax exemption without the concurrence of majority vote of all members of Congress;<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>i.<span style=""> </span>No use of public money or property for religious purposes except if priest is assigned to the armed forces, penal institutions, government orphanage or leprosarium;<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>j.<span style=""> </span>Money collected on tax levied for a special purpose to be used only for such purpose, balance if any, to general funds;<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>k.<span style=""> </span>The Supreme Court's power to review judgments or orders of lower courts in all cases involving the legality of any tax, impose, assessment or toll or the legality of any penalty imposed in relation to the above;<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>l.<span style=""> </span>Authority of local government units to create their own sources of revenue, to levy taxes, fees and other charges subject to guidelines and limitations imposed by Congress consistent with the basic policy of local autonomy;<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>m.<span style=""> </span>Automatic release of local government's just share in national taxes;<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>n.<span style=""> </span>Tax exemption of all revenues and assets of non-stock, non-profit educational institutions used actually, directly and exclusively for educational purposes;<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>o.<span style=""> </span>Tax exemption of all revenues and assets of proprietary or cooperative educational institutions subject to limitations provided by law including restrictions on dividends and provisions for reinvestment of profits;<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>p.<span style=""> </span>Tax exemption of grants, endowments, donations or contributions used actually, directly and exclusively for educational purposes subject to conditions prescribed by law.<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><o:p> </o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span><b style=""><span style=""> </span><span style=""> </span>19.<span style=""> </span><span style=""> </span>Equal protection of the law clause is subject to reasonable classification.</b><span style=""> </span>If the groupings are characterized by substantial distinctions that make real differences, one class may be treated and regulated differently from another.<span style=""> </span>The classification must also be germane to the purpose of the law and must apply to all those belonging to the same<span style=""> </span>class. <i style="">(Tiu, et al., v. Court of Appeals, et al., </i>G.R. No. 127410, January 20, 1999)<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><o:p> </o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span><span style=""> </span><b style="">20.<span style=""> </span>Classification, to be valid, must</b> (a) rest on substantial distinctions, (b) be germane to the purpose of the law, (c) not be limited to existing conditions only, and (d) apply equally to all members of the same class. <i style="">(Tiu, et al., v. Court of Appeals, et al., </i>G.R. No. 127410, January 20, 1999)<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><o:p> </o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span><b style="">21.<span style=""> </span><span style=""> </span>The law grant of tax and duty-free status under<span style=""> </span>Rep. Act No. 7227, to retailers inside the SSEZ without granting the same to those outside the SSEZ.<span style=""> </span>Is there a violation of the equal protection clause ?<i style=""><o:p></o:p></i></b></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span><u>SUGGESTED ANSWER</u>:<span style=""> </span>There is no violation of equal protection because there exists a valid classification as shown below:<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span>a.<span style=""> </span>Significant distinctions exist between the two groups.<span style=""> </span>Those outside of the SSEZ maintain their business within Philippine customs territory while those within the SSEZ operate within the so-called “separate customs territory.”<span style=""> </span>To grant the same privileges would clearly defeat the statue’s intent to carve a territory out of the military reservations in Subic Bay where free flow of goods and capital is maintained.<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span>b.<span style=""> </span>The classification is germane to the purpose of Rep. Act No. 7227.<span style=""> </span>As held in <i style="">Tiu,</i> the real concern of the law is to convert the lands formerly occupied by the US military bases into economic or industrial areas.<span style=""> </span>In furtherance of such objective, Congress deemed it necessary to extend economic incentives, in terms of a complete package of tax incentives and other benefits, to the establishments within the zone to attract and encourage foreign and local investors.<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span>c.<span style=""> </span>The classification is not limited to the existing conditions when the law was promulgated but to future conditions as well, inasmuch as the law envisioned the former military reservation to ultimately develop into a self-sustaining investment center.<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span>d.<span style=""> </span>The classification applies equally to all retailers found within the “secured area.”<span style=""> </span>As ruled in <i style="">Tiu</i>, the individuals and businesses within the “secured area,” being<span style=""> </span>in like circumstances or contributing directly to the achievement of the end purposes of the law, are not categorized further.<span style=""> </span>They are all similarly treated, both in privileges granted and in obligations required.<span style=""> </span>(<i style="">Coconut Oil Refiners Association, Inc., etc., et al., v. Torres, etc., et al., </i>G. R. No. 132527, July 29, 2005 citing <i style="">Tiu, et al., v. Court of Appeals, et al., G.R. No. 127410, </i>January 20, 1999, 301 SCRA 278)<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><o:p> </o:p></span></p> <p class="MsoNormal" style="text-align: justify; text-indent: 0.4in;"><b style=""><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US">22.<span style=""> </span>Is the statutory grant of tax and duty-free importation into the Subic Special Economic Zone violative the “preferential use” concept of the Constitution ?<i style=""><o:p></o:p></i></span></b></p> <p class="MsoNormal" style="text-align: justify; text-indent: 0.4in;"><u><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US">SUGGESTED ANSWER</span></u><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US">:<span style=""> </span>No.<span style=""> </span>The mere fact that the law authorizes the importation and trade of foreign goods does not suffice to declare it unconstitutional on this ground.<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span>While the Constitution does not encourage the unlimited entry of foreign goods, services and investments into the country, it does not prohibit them either.<span style=""> </span>In fact, it allows an exchange on the basis of equality and reciprocity, frowning only in foreign competition that is unfair.<span style=""> </span>(<i style="">Coconut Oil Refiners Association, Inc., etc., et al., v. Torres, etc., et al., </i>G. R. No. 132527, July 29, 2005 citing <i style="">Tanada v. Angara, </i>G. R. No. 118295, May 2, 1997, 272 SCRA 18)<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><o:p> </o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><b style=""><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span>23.<span style=""> </span></span></b><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span><span style=""> </span><b style="">It is inherent in the power to tax that the State be free to select the subjects of taxation,</b> and it has been repeatedly held that, "inequalities which result from a singling out of one particular class of taxation, or exemption, infringe no constitutional limitation."<span style=""> </span><i style="">(Commissioner of Internal Revenue, et al., v. Santos, et al., </i>277 SCRA 617)<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span><o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span><b style="">24.<span style=""> </span><span style=""> </span>A lawful tax on a new subject, or an increased tax on an old one, does not interfere with a contract or impairs its obligation</b>, within the meaning of the constitution.<span style=""> </span>Even though such taxation may affect particular contracts, as it may increase the debt of one person and lessen the security of another, or may impose additional burdens upon one class and release the burdens of another, still the tax must be paid unless prohibited by the constitution, nor can it be said that it impairs the obligations of any existing contract in its true and legal sense. <i style="">(Tolentino v. Secretary of Finance, et al., and companion cases, </i>235 SCRA 630)<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span><o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><b style=""><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span></span></b><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span><span style=""> </span><b style="">25.<span style=""> </span>Under the now prevailing Constitution, where there is neither a grant nor prohibition by statute, the taxing power of local governments must be deemed to exist although Congress may provide statutory limitations and guidelines</b> in order to safeguard the viability and self-sufficiency of local government<span style=""> </span>units by directly granting them general and broad tax powers. (<i style="">City Government of San Pablo, Laguna, et al., v. Reyes, et al., </i>G.R. No. 127708, March 25, 1999)<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify; text-indent: 0.5in;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><o:p> </o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><b style=""><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span>26. <span style=""> </span>The Local Government Code explicitly authorizes provinces and cities, notwithstanding “any exemption granted by any law or other special law” to impose a tax on businesses enjoying a franchise.</span></b><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span>Indicative of the legislative intent to carry out the constitutional mandate of vesting broad tax powers to local government units, the Local Government Code has withdrawn tax exemptions or incentives theretofore enjoyed by certain entities. <i style="">(City Government of San Pablo, Laguna, et al., v. Reyes, et al., </i>G.R. No. 127708, March 25, 1999)<i style=""><o:p></o:p></i></span></p> <p class="MsoNormal" style="text-align: justify; text-indent: 0.5in;"><i style=""><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><o:p> </o:p></span></i></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span><b style="">27<i style="">.<span style=""> </span><span style=""> </span></i></b><i style="">Philippine Long Distance Telephone Company, Inc., v. City of Davao, et al., etc., </i>G. R. No. 143867, August 22, 2001,<span style=""> </span>upheld the authority of the City of Davao, a local government unit, to impose and collect a local franchise tax because the Local Government has withdrawn all tax exemptions previously enjoyed by all persons and authorized local government units to impose a tax on business enjoying a franchise tax notwithstanding the grant of tax exemption to them.<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><o:p> </o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span><b style="">28.<span style=""> </span><span style=""> </span><span style=""> </span>“Paradigm shift” from exclusive Congressional power to direct grant of taxing power to local legislative bodies.</b><span style=""> </span>The power to tax is no longer vested exclusively on Congress; local legislative bodies are now given direct authority to levy taxes, fees and other charges pursuant to Article X, section 5 of the 1987 Constitution.<span style=""> </span>(<i style="">Batangas Power Corporation v. Batangas City, et al. </i>G. R. No. 152675, and companion case, April 28, 2004 citing <i style="">National Power Corporation v. City of Cabanatuan, </i>G. R. No. 149110, April 9, 2003)<span style=""> </span><o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><o:p> </o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><b style=""><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span>29.<span style=""> </span>The fundamental law did not intend the direct grant to local government units to be absolute and<span style=""> </span>unconditional</span></b><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US">, the constitutional objective obviously is to ensure that, while local government units are being strengthened and made more autonomous, the legislature must still see to it that:<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span>a.<span style=""> </span><span style=""> </span>the taxpayer will not be over-burdened or saddled with multiple and unreasonable impositions;<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span>b.<span style=""> </span><span style=""> </span>each local government unit will have its fair share of available resources;<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span>c.<span style=""> </span><span style=""> </span>the resources of the national government will be unduly disturbed; and<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span>d.<span style=""> </span><span style=""> </span>local taxation will be fair, uniform and just. (<i style="">Manila Electric Company v. Province of Laguna, et al., </i>G.R. No. 131359, May 5, 1999)<i style=""> <o:p></o:p></i></span></p> <p class="MsoNormal" style="text-align: justify;"><i style=""><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><o:p> </o:p></span></i></p> <p class="MsoNormal" style="text-align: justify;"><b style=""><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span><span style=""> </span><span style=""> </span>30.<span style=""> </span>The withdrawal of a tax exemption should not be construed as prohibiting future grants of exemption from all taxes.</span></b><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span>Indeed, the grant of taxing powers to local government units under the Local Government Code does not affect the power of Congress to grant exemptions to certain persons, pursuant to a declared national policy.<span style=""> </span>The legal effect of the constitutional grant to local governments simply means that in interpreting statutory provisions on municipal taxing powers, doubts must be resolved in favor of municipal corporations. <i style="">(Philippine Long Distance Telephone Company, Inc., v. City of Davao, et al., etc., </i>G. R. No. 143867, August 22, 2001)<i style=""><o:p></o:p></i></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><o:p> </o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span><span style=""> </span><b style="">31.<span style=""> </span><span style=""> </span>When Congress approved a provision</b> that,<span style=""> </span>“Any advantage, favor, privilege, exemption, or immunity granted under existing franchises, or may hereafter be granted, shall ipso facto become part of previously granted telecommunications franchises and shall be accorded immediately and unconditionally to the grantees of such franchises: Provided, however, That the foregoing shall neither apply to nor affect provisions of telecommunications franchises concerning territory covered by the franchise, the life span of the franchise, or the type of service authorized by the franchise.”<span style=""> </span>(Underscoring supplied) <b style="">there was no intention for it to operate as a blanket tax exemption to all telecommunications entities.</b><span style=""> </span>Applying the rule of strict construction of laws granting tax exemptions and the rule that doubts should be resolved in favor of municipal corporations in interpreting statutory provisions on municipal taxation, it was held that said provisions cannot be considered as extending its application to franchises such as that of PLDT. <i style="">(Philippine Long Distance Telephone Company, Inc., v. City of Davao, et al., etc</i>., G. R. No. 143867, August 22, 2001<i style="">)<o:p></o:p></i></span></p> <p class="MsoNormal" style="text-align: justify;"><i style=""><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><o:p> </o:p></span></i></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span><b style=""><span style=""> </span>32.<span style=""> </span><span style=""> </span>When an item of income is taxed in the Philippines and the same income is taxed in another country, this would be known as international juridical double taxation</b> which is the imposition of comparable taxes in two or more states on the same taxpayer in respect of the same subject matter and for identical grounds. <i style="">(Commissioner of Internal Revenue v. S.C. Johnson and Son, Inc., et al., </i>G.R. No. 127105,<span style=""> </span>June 25, 1999)<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><b style=""><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span></span></b><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span><b style="">33. <span style=""> </span>A tax deduction</b> is defined as a subtraction fro income for tax purposes, or an amount that is allowed by law to reduce income prior to the application of the tax rate to compute the amount of tax which is due.<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span>A tax deduction reduces the income that is subject to tax in order to arrive at taxable income. (<i style="">Commissioner of Internal Revenue v. Central Luzon Drug Corporation, </i>G. R. No. 159647, April 15, 2005)<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><o:p> </o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><b style=""><i style=""><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span></span></i></b><b style=""><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US">34.<span style=""> </span>The petitioners allege that the R-VAT law is constitutional because the Bicameral Conference Committed has exceeded its authority in including provisions which were never included in the versions of both the House and Senate such as inserting the stand-by authority to the President to increase the VAT from 10% to 12%; deleting entirely the no pass-on provisions found in both the House and Senate Bills; inserting the provision imposing a 70% limit on the amount of input tax to be credited against the output tax; and including the amendments introduced only by Senate Bill No. 1950 regarding other kinds of taxes in addition to the value-added tax.<span style=""> </span>Thus, there was a violation of the constitutional mandate that revenue bills shall originate exclusively from the House of Representatives.<o:p></o:p></span></b></p> <p class="MsoNormal" style="text-align: justify;"><b style=""><i style=""><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span></span></i></b><b style=""><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US">Are the contentions of such weight as to constitute grave abuse of discretion which may invalidate the law ?<span style=""> </span>Explain briefly.<o:p></o:p></span></b></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span><u>SUGGESTED ANSWER</u>:<span style=""> </span>No.<span style=""> </span>There was no grave abuse of discretion because<span style=""> </span>all the changes and modifications made by the Bicameral Conference Committee were germane to subjects of the provisions referred to it for reconciliation. <o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span>The Bicameral Conference Committee merely exercised the judicially recognized long-standing legislative practice of giving said conference committee ample latitude for compromising differences between the Senate and the House.<span style=""> </span>[<i style="">Abakada Guro Party List (etc.) v. Ermita, etc., et al., </i>G. R. No. 168056, September 1, 2005 and companion cases citing <i style="">Philippine Judges Association v. Pardo, </i>G. R. No. 105371, November 11, 1993, 227 SCRA 703; <i style="">Tolentino v. Secretary of Finance, et al., </i>G. R. No. 115455, August 25, 1994, 235SCRA 630]<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span><o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span><b style="">35.<span style=""> </span><span style=""> </span>The VAT is assailed as being regressive and therefore violative of the mandate to evolve a progressive system of taxation.<span style=""> </span>Do you agree ?<span style=""> </span>Explain your answer<i style="">.<o:p></o:p></i></b></span></p> <p class="MsoNormal" style="text-align: justify;"><b style=""><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span></span></b><u><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US">SUGGESTED ANSWER:</span></u><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span>No.<span style=""> </span>The VAT does not violate the progressive system of taxation.<b style=""><span style=""> </span></b>The mandate to Congress is not to prescribe but to evolve a progressive system of taxation.<span style=""> </span>Otherwise, sales taxes which perhaps are the oldest form of indirect taxes, would have been prohibited with the proclamation of the constitutional provision.<span style=""> </span>Sales taxes are also regressive. [<i style="">Abakada Guro Party List (etc.) v. Ermita, etc., et al., </i>G. R. No. 168056, September 1, 2005 and companion cases citing <i style="">Tolentino v. Secretary of Finance, et al., </i>G. R. No. 115455, August 25, 1994, 235 SCRA 630]<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><o:p> </o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><b style=""><span style="font-size: 12pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US">CONSTITUTIONAL TAX EXEMPTIONS<o:p></o:p></span></b></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 11pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><o:p> </o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 11pt; font-family: Arial;" lang="EN-US"><span style=""> </span></span><b style=""><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">1.<span style=""> </span><span style=""> </span>What constitutional exemptions are enjoyed by real property ?<o:p></o:p></span></b></p> <p class="MsoNormal" style="text-align: justify;"><b style=""><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span></span></b><u><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">SUGGESTED ANSWER:</span></u><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>Charitable institutions, churches and parsonages or convents appurtenant thereto, mosques, non-profit cemeteries, and all lands, buildings and improvements that are actually, directly and exclusively used for religious, charitable or educational purposes are exempt from taxation<b style="">. </b><span style=""> </span>[Sec.28 (3) Article VI, 1987 Constitution]<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><o:p> </o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span><b style="">2.<span style=""> </span><span style=""> </span>The above constitutional tax exemptions <span style=""> </span>refer only to real property</b> that are actually, directly and exclusively used for religious, charitable or educational purposes, and that the only constitutionally recognized exemption from taxation of revenues are those earned by non-profit, non-stock educational institutions which are actually, directly and exclusively used for educational purposes. <i style="">(Commissioner of Internal Revenue v. Court of Appeals, et al., </i>298 SCRA 83)<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>The constitutional tax exemption covers property taxes only. What is exempted is not the institution itself, those exempted from real estate taxes are lands, buildings and improvements actually, directly and exclusively used for religious, charitable or educational purposes.<span style=""> </span>(</span><st1:place><st1:placename><i style=""><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">Lung</span></i></st1:placename><i style=""><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"> </span></i><st1:placetype><i style=""><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">Center</span></i></st1:placetype></st1:place><i style=""><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"> of the </span></i><st1:country-region><st1:place><i style=""><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">Philippines</span></i></st1:place></st1:country-region><i style=""><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"> v. </span></i><st1:city><st1:place><i style=""><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">Quezon City</span></i></st1:place></st1:city><i style=""><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">, et al., etc., </span></i><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">G. R. No. 144104, </span><st1:date month="6" day="29" year="2004"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">June 29, 2004</span></st1:date><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"> citing Justice Davide)<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><o:p> </o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span><b style="">3.<span style=""> </span><span style=""> </span>The 1935 Constitution stated that the lands, buildings, and improvements are “used exclusively” but the present Constitution requires that the lands, buildings and improvements are “actually, directly and exclusively used.”</b><span style=""> </span>The change should not be ignored.<span style=""> </span>Reliance on past decisions would have sufficed were the words “actually” as well as :directly” are not added. There must be proof therefore of the actual and direct use to be exempt from taxation.<span style=""> </span>(<i style="">Lung Center of the Philippines v. Quezon City, et al., etc., </i>G. R. No. 144104, June 29, 2004 citing <i style="">Province of Abra v. Hernando, </i>107 SCRA 105)<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><o:p> </o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span><b style="">4.<span style=""> </span><span style=""> </span>What is meant by “actual, direct and exclusive use” of the property for charitable purposes is the direct and immediate and actual application of the property itself</b> to the purposes for which the charitable institution is organized.<span style=""> </span>It is not the use of the income from the real property that is determinative of whether the property is used for tax-exempt purposes.<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>If real property is used for one or more commercial purposes, it is not exclusively used for the exempted purpose but is subject to taxation,.<span style=""> </span>The words “dominant use” or “principal use” cannot be substituted for the words “used exclusively” without doing violence to the Constitution and the law. Solely is synonymous with exclusively.<span style=""> </span>(<i style="">Lung Center of the Philippines v. Quezon City, et al., etc., </i>G. R. No. 144104, June 29, 2004)<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><o:p> </o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span><b style="">5.<span style=""> </span><span style=""> </span>Portions of the land of a charitable institution, such as a hospital, leased to private entities as well as those parts of the hospital leased to private individuals are not exempt from real property taxes.<span style=""> </span></b>On the other hand, the portion of the land occupied by the hospital and portions of the hospital used for its patients, whether paying or non-paying, are exempt from real property taxes. (<i style="">Lung Center of the Philippines v. Quezon City, et al., etc., </i>G. R. No. 144104, June 29, 2004)<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><o:p> </o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span><b style="">6.</b><span style=""> </span><b style="">Distinction between </b></span><st1:place><st1:placename><b style=""><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US">Lung</span></b></st1:placename><b style=""><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"> </span></b><st1:placetype><b style=""><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US">Center</span></b></st1:placetype></st1:place><b style=""><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"> and City Assessor of </span></b><st1:place><b style=""><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US">Cebu</span></b></st1:place><b style=""><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US">.</span></b><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span>The ruling in City Assessor of Cebu v. Association of Benevola de Cebu, Inc.., G. R. No. 152904, </span><st1:date month="6" day="8" year="2007"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US">June 8, 2007</span></st1:date><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"> was not an interpretation of tax exemption.<span style=""> </span>Furthermore, the doctors’ offices in City Assessor of Cebu were exclusively used by doctors duly accredited with the hospital.<span style=""> </span>No such showing was made in </span><st1:place><st1:placename><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US">Lung</span></st1:placename><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"> </span><st1:placetype><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US">Center</span></st1:placetype></st1:place><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US">.<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><o:p> </o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span><b style="">7.<span style=""> </span> As a general principle, a charitable institution does not lose its character as such and its exemption from taxes simply because it derives income from paying patients, whether out-patient, or confined in the hospital, or receives subsidies from the government.<span style=""> </span><o:p></o:p></b></span></p> <p class="MsoNormal" style="text-align: justify;"><b style=""><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span></span></b><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">So long as the money received is devoted or used altogether to the charitable object which it is intended to achieve; and no money inures to the private benefit of the persons managing or operating the institution.<span style=""> </span>(<i style="">Lung Center of the Philippines v. Quezon City, et al., etc., </i>G. R. No. 144104, June 29, 2004)<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><o:p> </o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span><b style="">8.<span style=""> </span><span style=""> </span>All revenues and assets of non-stock, non-profit educational institutions that are actually, directly and exclusively used for educational purposes shall be exempt from taxation.<o:p></o:p></b></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><o:p> </o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span><b style="">9.</b>.<span style=""> </span><b style="">Revenues and assets of proprietary educational institutions, including those which are cooperatively owned, may be entitled to exemptions subject to limitations provided by law including restrictions on dividends and provisions for reinvestments.</b><span style=""> </span>There is no law at the present which grants exemptions, other the exemptions granted to cooperatives.<span style=""> </span><o:p></o:p></span></p> <p class="MsoNormal" style=""><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><o:p> </o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><b style=""><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>10.<span style=""> </span>The NIRC recognizes the exemption from tax of the incomes of civic leagues or organizations not organized for profit </span></b><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">but operated exclusively for the promotion of social welfare, as well as clubs organized and operated exclusively for pleasure, recreation, and other non-profitable purposes where no part of the net income inures to the benefit of any private stockholder or member.<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><o:p> </o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span><b style="">11.<span style=""> </span><span style=""> </span></b>The tax exemption so recognized does not flow to income of whatever kind and character of the foregoing organizations from any of their properties, real or personal, or from any of their activities conducted for profit, regardless of the disposition made of such income, which shall be subject to income taxes. <i style="">(Commissioner of Internal Revenue v. Court of Appeals, et al., </i>298 SCRA 83)<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><b style=""><span style="font-family: Arial;" lang="EN-US"><o:p> </o:p></span></b></p> <p class="MsoNormal" style="text-align: justify;"><b style=""><span style="font-size: 12pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US">OTHER CONCEPTS:<o:p></o:p></span></b></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><o:p> </o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><b style=""><span style="font-size: 11pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span></span></b><b style=""><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US">1.<span style=""> </span><span style=""> </span>What is a tax amnesty ?<o:p></o:p></span></b></p> <p class="MsoNormal" style="text-align: justify;"><b style=""><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span></span></b><u><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US">SUGGESTED ANSWER:</span></u><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span>A tax amnesty is a general pardon or intentional overlooking by the State of its authority to impose penalties on persons otherwise guilty of evasion or violation of a revenue or a tax law.<span style=""> </span><i style="">(Commissioner of Internal Revenue v. Marubeni Corporation, </i>G.R. No. 137377, </span><st1:date month="12" day="18" year="2001"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US">December 18, 2001</span></st1:date><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US">)<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><u><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><o:p><span style="text-decoration: none;"> </span></o:p></span></u></p> <p class="MsoNormal" style="text-align: justify;"><b style=""><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span>2.</span></b><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span><b style=""><u>The purpose of tax amnesty</u></b> is to <o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span>a.<span style=""> </span>give tax evaders who wish to relent a chance to start a clean slate, and to <o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span>b.<span style=""> </span>give the government a chance to collect uncollected tax from tax evaders without having to go <span style=""> </span>through the tedious process of a tax case. <i style="">(Banas, Jr. v. Court <span style=""> </span>of Appeals, et al., </i>G.R. No. 102967, February 10, 2000<i style="">)<o:p></o:p></i></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span>c.<span style=""> </span>To improve tax collection.<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><o:p> </o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><b style=""><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span>3.<span style=""> </span><span style=""> </span>Distinguish tax amnesty<span style=""> </span>from tax exemption.<o:p></o:p></span></b></p> <p class="MsoNormal" style="text-align: justify;"><b style=""><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span></span></b><u><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US">SUGGESTED ANSWER:<o:p></o:p></span></u></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span>a.<span style=""> </span><span style=""> </span>Tax amnesty is an immunity from all criminal, civil and administrative liabilities arising from nonpayment of taxes (<i style="">People v. Castaneda, </i>G.R. No. L-46881, </span><st1:date month="9" day="15" year="1988"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US">September 15, 1988</span></st1:date><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US">) WHILE a tax exemption is an immunity from civil liability only.<span style=""> </span>It is an immunity or privilege, a freedom from a charge or burden to which others are subjected.<span style=""> </span><i style="">(Florer v. </i></span><st1:city><st1:place><i style=""><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US">Sheridan</span></i></st1:place></st1:city><i style=""><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US">, 137 Ind. 28, 36 NE 365)<o:p></o:p></span></i></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span>b.<span style=""> </span><span style=""> </span>Tax amnesty applies only to past tax periods, hence of retroactive application <i style="">(Castaneda,</i> <i style="">supra</i>) WHILE tax exemption has prospective application.<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><o:p> </o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><b style=""><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span>4. <span style=""> </span><span style=""> </span><span style=""> </span>Define tax avoidance and tax evasion<i style="">.<o:p></o:p></i></span></b></p> <p class="MsoNormal" style="text-align: justify;"><b style=""><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span></span></b><u><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US">SUGGESTED ANSWER:</span></u><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span>Tax avoidance is the use of legally permissible means to reduce the tax while tax evasion is the use of illegal means to escape the payment of taxes.<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><o:p> </o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span><b style="">5. <span style=""> </span>Tax evasion connotes the integration of three factors: <o:p></o:p></b></span></p> <p class="MsoNormal" style="text-align: justify;"><b style=""><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span></span></b><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US">a.<span style=""> </span>the end to be achieved, i.e., the payment of less than that known by the taxpayer to be legally due, or the non-payment of tax when it is shown that a tax is due;<span style=""> </span><o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span>b.<span style=""> </span>an accompanying state of mind which is described as being “evil” on “bad faith,” “willful,” or ”deliberate and not accidental”; and <o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span>c.<b style=""><span style=""> </span></b>a course of action or failure of action which is unlawful.<span style=""> </span>(<i style="">Commissioner of Internal Revenue v. The Estate of Benigno P. Toda, Jr., , etc.,</i> G. R. No. 147188, September 14, 2004)<b style=""><o:p></o:p></b></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><o:p> </o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><b style=""><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span>6.<span style=""> </span><span style=""> </span>What are the reasons why national taxes cannot be the subject of compensation and set-off with debts ?<i style=""><o:p></o:p></i></span></b></p> <p class="MsoNormal" style="text-align: justify;"><b style=""><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span></span></b><u><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US">SUGGESTED ANSWER</span></u><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US">:<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span>a.<span style=""> </span><span style=""> </span>The lifeblood theory;<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span>b.<span style=""> </span><span style=""> </span>Taxes are not contractual obligations but arise out of a duty to, and are the positive acts of government, to the making and enforcing of which the personal consent of the individual taxpayer is not required.<span style=""> </span><i style="">(Republic v. Mambulao Lumber Co., </i>4 SCRA 622)<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify; text-indent: 0.5in;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US">c.<span style=""> </span><span style=""> </span>The government and the taxpayer are not mutually creditors and debtors of each other and a claim for taxes is no such debt, demand, contract or judgment as is allowed to be set-off. <i style="">(Caltex Philippines, Inc. v. Commission on Audit, </i>208 SCRA 726, 756)<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><o:p> </o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><b style=""><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span>7.<span style=""> </span>Compensation</span></b><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"> takes place by operation of law, where the local government and the taxpayer are in their own right reciprocally debtors and creditors of each other, and that the debts are both due and demandable, in consequence of Articles 1278 and 1279 of the Civil Code.<span style=""> </span><i style="">(Domingo v. Garlitos, </i>8 SCRA 443)<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify; text-indent: 0.5in;"><i style=""><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><o:p> </o:p></span></i></p> <p class="MsoNormal" style="text-align: justify;"><b style=""><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span>8.<span style=""> </span><span style=""> </span>In case of a tax overpayment, where the BIR’s obligation to refund or set-off arises from the moment the tax was paid under the principle of <i style="">solutio indebeti</i>.<span style=""> </span></span></b><i style=""><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US">(Commissioner of Internal Revenue v. Esso Standard Eastern, Inc, </span></i><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US">172 SRCA 364)<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify; text-indent: 0.5in;"><i style=""><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><o:p> </o:p></span></i></p> <p class="MsoNormal" style="text-align: justify;"><b style=""><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span>9. <span style=""> </span><span style=""> </span>But note <i style="">Nestle Phil. v. Court of Appeals, et al., </i>G.R. No. 134114, July 6, 2001</span></b><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"> which held that in order for the rule on <i style="">solutio indebeti</i> to apply it is an essential condition that the petitioner must first show that its payment of the customs duties was in excess of what was required by the law at the time the subject 16 importations of milk and milk products were made.<span style=""> </span>Unless shown otherwise, the disputable presumption of regularity of performance of duty lies in favor of the Collector of Customs.<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><o:p> </o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><b style=""><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span>10.<span style=""> </span>A direct tax is a tax for which a taxpayer is directly liable on the transaction or business it engages in, without transferring the burden to someone else.<span style=""> </span></span></b><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US">Examples are individual and corporate income taxes, transfer taxes, and residence taxes.<span style=""> </span>(<i style="">Abakada Guro Party List (etc.) v. Ermita, etc., et al., </i>G. R. No. 168056, September 1, 2005 and companion cases, citing <i style="">Maceda v. Macaraig, Jr., </i>G.R. No. 88291, June 8, 1993, 223 SCRA 217)<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><o:p> </o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span><b style="">11.<span style=""> </span><span style=""> </span>Acesite is the owner and operator of restaurant which caters to the patrons of a casino operated by PAGCOR within its premises.<span style=""> </span>it billed PAGCOR for the cost of the food and beverages consumed by the PAGCOR’s patrons as well as the lease of the premises plus the VAT on these items.<span style=""> </span>PAGCOR paid Acesite minus the VAT claiming exemption while Acesite, in order to avoid legal implications, paid the P30 million tax and applied for a refund on the ground of solutio indebeti.<i style=""> <o:p></o:p></i></b></span></p> <p class="MsoNormal" style="text-align: justify;"><b style=""><i style=""><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span></span></i></b><b style=""><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US">Acesite cites the tax exemption grant in PAGCOR’s franchise as follows:<i style=""> </i></span></b><i style=""><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US">“The exemptions herein granted for earnings derived from the operations conducted under the franchise specifically from the payment of any tax, income, or otherwise, as well as any form of charges, fees or levies, <b style="">shall inure to the benefit of and extend to corporation(s), association (s), agency (cies), or individual(s) with whom the Corporation or operator has any contractual relationship in connection with the operations of the casino (s) authorized to be conducted under this Franchise </b>and to those receiving compensation or other remuneration from the Corporation or operator as a result of essential facilities furnished and/or technical services rendered to the Corporation or operator.”<span style=""> </span>(emphasis supplied)<o:p></o:p></span></i></p> <p class="MsoNormal" style="text-align: justify;"><b style=""><i style=""><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span></span></i></b><b style=""><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US">The BIR denied the claim on the ground that PAGCOR is exempt only from direct taxes and not from indirect taxes so Acesite may not avail of the exemption.<span style=""> </span>Is this correct ?<o:p></o:p></span></b></p> <p class="MsoNormal" style="text-align: justify;"><b style=""><i style=""><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span></span></i></b><u><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US">SUGGESTED ANSWER</span></u><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US">:<span style=""> </span>No.<span style=""> </span>As the law is worded the exemption flows to Acesite.<span style=""> </span>The law is clear that the exemption extends the exemption to entities or individuals dealing with PAGCOR.<span style=""> </span>(<i style="">Commissioner of Internal Revenue v. Acesite (Philippines) Hotel Corporation, </i>G. R. No. 147295, February 16, 2007)<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify; text-indent: 0.4in;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><o:p> </o:p></span></p> <p class="MsoNormal" style="text-align: justify; text-indent: 0.4in;"><b style=""><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US">12.<span style=""> </span>Silkair (Singapore) PTE, Ltd., an international carrier,<span style=""> </span>purchased aviation gas from Petron Corporation, which it uses for its operations.<span style=""> </span>It now claims for refund or tax credit for the excise taxes it paid claiming that it is exempt from the payment of excise taxes under the provisions of Sec. 135 of the NIRC of 1997 which provides that petroleum products are exempt from excise taxes when sold to<span style=""> </span></span></b><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>“Exempt entities or agencies covered by tax treaties, conventions, and other international agreements for their use and consumption:<span style=""> </span><i>Provided, however,</i> That the country of said foreign international carrier or exempt entities or agencies exempts from similar taxes petroleum products sold to Philippine carriers, entities or agencies”</span><b style=""><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><o:p></o:p></span></b></p> <p class="MsoNormal" style="margin-right: -0.05in; text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span><b style="">Silkair further anchors its claim on<span style=""> </span>Article 4(2) of the Air Transport Agreement between the Government of the Republic of the Philippines and the Government of the Republic of Singapore (Air Transport Agreement between RP and Singapore) which reads: </b>“Fuel, lubricants, spare parts, regular equipment and aircraft stores introduced into, or taken on board aircraft in the territory of one Contracting party by, or on behalf of, a designated airline of the other Contracting Party and intended solely for use in the operation of the agreed services shall, with the exception of charges corresponding to the service performed, be exempt from the same customs duties, inspection fees and other duties or taxes imposed in the territories of the first Contracting Party , even when these supplies are to be used on the parts of the journey performed over the territory of the Contracting Party in which they are introduced into or taken on board.<span style=""> </span>The materials referred to above may be required to be kept under customs supervision and control.”<b style=""><o:p></o:p></b></span></p> <p class="MsoNormal" style="margin-right: -0.05in; text-align: justify;"><b style=""><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>Silkair likewise argues that it is exempt from indirect taxes because the Air Transport Agreement between RP and </span></b><st1:country-region><st1:place><b style=""><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">Singapore</span></b></st1:place></st1:country-region><b style=""><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"> grants exemption “from the same customs duties, inspection fees and other duties or taxes imposed in the territory of the first Contracting Party. It invokes <i>Maceda v. Macaraig, Jr., </i><span style=""> </span>G.R. No. 88291, </span></b><st1:date month="5" day="31" year="1991"><b style=""><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">May 31, 1991</span></b></st1:date><b style=""><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">, 197 SCRA 771.which upheld the claim for tax credit or refund by the National Power Corporation (NPC) on the ground that the NPC is exempt even from the payment of indirect taxes.<o:p></o:p></span></b></p> <p class="MsoNormal" style="margin-right: -0.05in; text-align: justify;"><b style=""><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>Is Silkair entitled to the tax refund or credit it seeks ?<span style=""> </span>Reason out your answer.<o:p></o:p></span></b></p> <p class="MsoNormal" style="margin-right: -0.05in; text-align: justify;"><b style=""><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span></span></b><u><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">SUGGESTED ANSWER:</span></u><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>Silkair is not entitled to tax refund or credit for the following reasons:<span style=""> </span><o:p></o:p></span></p> <p class="MsoNormal" style="margin-right: -0.05in; text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>a.<span style=""> </span>The excise tax on aviation fuel is an indirect tax. The proper party to question, or seek a refund of, an indirect tax is the statutory taxpayer, the person on whom the tax is imposed by law and who paid the same even if he shifts the burden thereof to another.</span><i><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"> </span></i><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">(<i>Philippine Geothermal, Inc. v. Commissioner of Internal Revenue, </i></span><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">G.R. No. 154028, July 29, 2005, 465 SCRA 308, 317-318)<span style=""> </span></span><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>The NIRC provides that the excise tax should be paid by the manufacturer or producer before removal of domestic products from<span style=""> </span>place of production. Thus, Petron Corporation, not Silkair, is the statutory taxpayer which is entitled to claim a refund based on Section 135 of the NIRC of 1997 and Article 4(2) of the Air Transport Agreement between RP and Singapore.<span style=""> </span><o:p></o:p></span></p> <p class="MsoNormal" style="margin-right: -0.05in; text-align: justify; text-indent: 0.5in;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">Even if Petron Corporation passed on to Silkair the burden of the tax, the additional amount billed to Silkair for jet fuel is not a tax but part of the price which Silkair had to pay as a purchaser.<sup> </sup></span><i><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span></span></i><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">[<i>Philippine Acetylene Co., Inc. v. Commissioner of Internal Revenue, </i></span><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">127 Phil. 461, 470 (1967)]</span><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><o:p></o:p></span></p> <p class="MsoNormal" style="margin-right: -0.05in; text-align: justify; text-indent: 0.5in;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">b.<span style=""> </span>Silkair could not seek refuge under <i>Maceda v. Macaraig, Jr.,</i></span><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"> G.R. No. 88291, May 31, 1991, 197 SCRA 771.which upheld the claim for tax credit or refund by the National Power Corporation (NPC) on the ground that the NPC is exempt even from the payment of indirect taxes. <o:p></o:p></span></p> <p class="MsoNormal" style="margin-right: -0.05in; text-align: justify; text-indent: 0.5in;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">In <i>Commissioner of Internal Revenue v. Philippine Long Distance Telephone Company</i>, G.R. No. 140230, December 15, 2005, 478 SCRA 61<span style=""> </span>the Supreme Court clarified the ruling in <i>Maceda v. Macaraig, Jr., viz</i>: It may be so that in <i>Maceda vs. Macaraig, Jr.</i>, the Court held that an exemption from “<b style=""><i>all taxes</i></b>” granted to the National Power Corporation (NPC) under its charter includes both direct and indirect taxes. <span style=""> </span><o:p></o:p></span></p> <p class="MsoNormal" style="margin-right: -0.05in; text-align: justify; text-indent: 0.5in;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">An exemption from “<span style="">all taxes</span>” excludes indirect taxes, unless the exempting statute, like NPC’s charter, is so couched as to include indirect tax from the exemption. The amendment under Republic Act No. 6395 enumerated the details covered by NPC’s exemption.<span style=""> </span>Subsequently, P.D. 380, made even more specific the details of the exemption of NPC to cover, among others, <i>both direct and indirect taxes</i> on all petroleum products used in its operation.<span style=""> </span>Presidential Decree No. 938 [NPC’s amended charter] amended the tax exemption by simplifying the same law in general terms.<span style=""> </span>It succinctly exempts NPC from “all forms of taxes, duties[,] fees…” The use of the phrase “all forms” of taxes demonstrates the intention of the law to give NPC all the tax exemptions it has been enjoying before.<o:p></o:p></span></p> <p class="MsoNormal" style="margin-right: -0.05in; text-align: justify; text-indent: 0.5in;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">The exemption granted under Section 135 (b) of the NIRC of 1997 and Article 4(2) of the Air Transport Agreement between RP and Singapore cannot, without a clear showing of legislative intent, be construed as including indirect taxes.<span style=""> </span>Statutes granting tax exemptions must be construed <i>in strictissimi juris</i> against the taxpayer and liberally in favor of the taxing authority, and if an exemption is found to exist, it must not be enlarged by construction.<span style=""> </span>(</span><i style=""><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US">Silkair (Singapore) PTE, Ltd., v. Commissioner of Internal Revenue, </span></i><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US">G.R. No. 173594, February 6, 2008)<span style=""> </span></span><span style="font-size: 11pt; font-family: Arial;" lang="EN-US"><o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 11pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><o:p> </o:p></span></p> <p class="MsoNormal" style="text-align: center;" align="center"><b style=""><u><span style="font-size: 14pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US">NATIONAL INTERNAL REVENUE CODE<o:p></o:p></span></u></b></p> <p class="MsoNormal" style="margin-left: 0.5in; text-align: justify; text-indent: 0.5in;"><span style="font-size: 11pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><o:p> </o:p></span></p> <p class="MsoNormal" style="text-align: center;" align="center"><span style="font-size: 16pt; font-family: "Arial Black"; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span></span><b style=""><u><span style="font-size: 12pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US">INCOME TAXATION<o:p></o:p></span></u></b></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 11pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><o:p> </o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 11pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span></span><b style=""><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US">1.<span style=""> </span>Is a Commissioner of Internal Revenue liable for damages with respect to a ruling she issued, without notice, <span style=""> </span>that had adverse effects against a taxpayer ?<o:p></o:p></span></b></p> <p class="MsoFootnoteText" style="text-align: justify;"><b style=""><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span></span></b><u><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US">SUGGESTED ANSWER:</span></u><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span>Yes.<span style=""> </span></span><span style="font-size: 10.5pt; font-family: Arial; color: black;" lang="EN-US">A</span><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"> public officer who directly or indirectly violates the constitutional rights of another, may be validly sued for damages under Article 32 of the Civil Code even if his acts were not so tainted with malice or bad faith. (<i style=""><span style="letter-spacing: -0.1pt;">Vinzons-Chato v. Fortune Tobacco Corporation, </span></i><span style="letter-spacing: -0.1pt;">G. R. No. 141309, June 19, 2007 </span>citing <i style=""><span style="color: black;">Cojuangco, Jr. v. Court of Appeals</span></i><span style="color: black;">, </span>G.R. No. 119398, July 2, 1999, 309 SCRA 602, 604)<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify; text-indent: 0.5in;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">Thus, the rule in this jurisdiction is that a public officer may be validly sued in his/her private capacity for acts done in the course of the performance of the functions of the office, where said public officer: (1) acted with malice, bad faith, or negligence; or (2) where the public officer violated a constitutional right of the plaintiff. (<i style="">Ibid.</i>)<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><o:p> </o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><o:p> </o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span><b style="">2.<span style=""> </span><span style=""> </span></b>In <i style="">Evangelista v. Collector, </i>102 Phil. 14<i style="">0,</i> the Supreme Court held, citing Mertens, that <b style="">the term partnership includes </b>a syndicate, group, pool, joint venture or other unincorporated organization, through or by means of which any business, financial operation, or venture is carried on.<span style=""> </span><o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify; text-indent: 0.5in;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><o:p> </o:p></span></p> <p class="MsoNormal" style="text-align: justify; text-indent: 0.5in;"><b style=""><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US">3. <span style=""> </span>Co-heirs who own inherited properties which produce income should not automatically be considered as partners of an unregistered corporation subject to income tax for the following reasons:<o:p></o:p></span></b></p> <p class="MsoNormal" style="text-align: justify; text-indent: 0.5in;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US">a.<span style=""> </span>The sharing of gross returns does not of itself establish a partnership, whether or not the persons sharing them have a joint or common right or interest in any property from which the returns are derived.<span style=""> </span>There must be an unmistakable intention to form a partnership or joint venture<i style="">.<span style=""> </span>(Obillos, Jr. v. Commissioner of Internal Revenue, </i>139 SCRA 436)<i style=""><o:p></o:p></i></span></p> <p class="MsoNormal" style="text-align: justify; text-indent: 0.5in;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US">b.<span style=""> </span><span style=""> </span>There is no contribution or investment of additional capital to increase or expand the inherited properties, merely continuing the dedication of the property to the use to which it had been put by their forebears.<span style=""> </span>(<i style="">Ibid.</i>)<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify; text-indent: 0.5in;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US">c.<span style=""> </span><span style=""> </span>Persons who contribute property or funds to a common enterprise and agree to share the gross returns of that enterprise in proportion to their contribution, but who severally retain the title to their respective contribution, are not thereby rendered partners.<span style=""> </span>They have no common stock capital, and no community of interest as principal proprietors in the business itself from which the proceeds were derived.<span style=""> </span>(Elements of the Law of Partnership by Floyd R. Mechem, 2<sup>nd</sup> Ed., Sec. 83, p. 74 cited in <i style="">Pascual v. Commissioner of Internal Revenue, </i>166 SCRA 560)<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify; text-indent: 0.5in;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><o:p> </o:p></span></p> <p class="MsoNormal" style="text-align: justify; text-indent: 0.5in;"><b style=""><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US">4.<span style=""> </span><span style=""> </span>The common ownership of property does not itself create a partnership between the owners</span></b><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US">, though they may use it for purpose of making gains, and they may, without becoming partners, are among themselves as to the management and use of such property and the application of the proceeds therefrom..<span style=""> </span>(<i style="">Spurlock v,. Wilson, </i>142 S.W. 363, 160 <i style="">No. App. 14</i>, cited in <i style="">Pascual v. Commissioner of Internal Revenue, </i>166 SCRA 560)<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><o:p> </o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span><b style="">5.<span style=""> </span><span style=""> </span>Income</b> is gain derived and severed from capital, from labor or from both combined.<span style=""> </span>For example, to tax a stock dividend would be to tax a capital increase rather than the income. <i style="">(Commissioner of Internal Revenue v. Court of Appeals, et al</i>., G.R. No. 108576, January 20, 1999)<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span><o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span><b style="">6. <span style=""> </span></b>An insolvent debtor does not realize taxable income from the cancellation or forgiveness.<span style=""> </span><i style="">(Commissioner v. Simmons Gin Co., </i>43 Fd 327 CCA 10<sup>th</sup>)<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><o:p> </o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span><b style="">7.</b><span style=""> </span><span style=""> </span>The insolvent debtor realizes income resulting from the cancellation or forgiveness of indebtedness when he becomes solvent.<span style=""> </span><i style="">(Lakeland Grocery Co., v. Commissioner </i>36 BTA (F) 289)<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><o:p> </o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><o:p> </o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><b style=""><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span>8.<span style=""> </span><span style=""> </span></span></b><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US">The <b style="">Global system of income taxation</b> is a system employed where the tax system views indifferently the tax base and generally treats in common all categories of taxable income of the individual.<span style=""> </span><i style="">(Tan v. del Rosario, Jr., </i>237 SCRA 324, 331)<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span><o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span><b style="">9.<span style=""> </span></b>The <b style="">Schedular system of income taxation</b> is a system employed where the income tax treatment varies and is made to depend on the kind or category of taxable income of the taxpayer.<span style=""> </span><i style="">(Tan v. del Rosario, Jr., 237 SCRA 324, 331)<o:p></o:p></i></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span><o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span><span style=""> </span><b style="">10. <span style=""> </span>What are the requisites for the deductibility of ordinary and necessary trade, business, or professional expenses, like expenses paid for legal and auditing services ?<o:p></o:p></b></span></p> <p class="MsoNormal" style="text-align: justify;"><b style=""><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span></span></b><u><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US">SUGGESTED ANSWER</span></u><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US">:<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span>a.<span style=""> </span>the expense must be ordinary and necessary;<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span>b.<span style=""> </span>it must have been paid or incurred during the taxable year dependent upon the method of accounting upon the basis of which the net income is computed.<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span>c.<span style=""> </span>it must be supported by receipts, records or other pertinent papers.<span style=""> </span>(<i style="">Commissioner of Internal Revenue v, Isabela cultural Corporation, </i>G. R. No. 172231, </span><st1:date month="2" day="12" year="2007"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US">February 12, 2007</span></st1:date><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US">)<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><o:p> </o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span><span style=""> </span><b style="">11.<span style=""> </span>TMG Corporation using the accrual method of accounting.<span style=""> </span>In 2005 XYZ Law Firm and ABC Auditing Firm rendered various services which were billed by these firms only during the following year 2006.<span style=""> </span>Since the bills for legal and auditing services were received only in 2006 and paid in the same year, TMG deducted the same from its 2006<span style=""> </span>gross income.<span style=""> </span>The BIR disallowed the deduction ?<o:p></o:p></b></span></p> <p class="MsoNormal" style="text-align: justify;"><b style=""><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span>Who is correct, TMG or BIR ?<span style=""> </span>Explain.<o:p></o:p></span></b></p> <p class="MsoNormal" style="text-align: justify;"><b style=""><i style=""><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span></span></i></b><u><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US">SUGGESTED ANSWER</span></u><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US">:<span style=""> </span>The BIR is correct.<span style=""> </span>TMG should have deducted the<span style=""> </span>professional and legal fees in the year they were incurred in 2005 and not in 2006 because at the time the services were rendered in 2005, there was already an obligation to pay them.<span style=""> </span>(<i style="">Commissioner of Internal Revenue v, Isabela Cultural Corporation, </i>G. R. No. 172231, </span><st1:date month="2" day="12" year="2007"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US">February 12, 2007</span></st1:date><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US">)<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify; text-indent: 0.5in;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span><o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify; text-indent: 0.5in;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><o:p> </o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><b style=""><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>12.<span style=""> </span></span></b><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>The fringe benefits tax is a final withholding tax imposed on the grossed-up monetary value of fringe benefits furnished, granted or paid by the employer to the employee, except rank and file employees.<span style=""> </span>[1<sup>st</sup> par., Sec. 2.33 (A), Rev. Regs. No. 3-98]<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><o:p> </o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span><b style="">13.<span style=""> </span>What is meant by “fringe benefit” for purposes of taxation ?<o:p></o:p></b></span></p> <p class="MsoNormal" style="text-align: justify;"><b style=""><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span></span></b><u><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">SUGGESTED ANSWER:</span></u><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>For purposes of taxation, fringe benefit means any good, service, or other benefit furnished or granted in cash or in kind by an employer to an individual employee (except rank and file employees), such as but not limited to:<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>a.<span style=""> </span>Housing;<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>b.<span style=""> </span>Expense account;<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>c.<span style=""> </span>Vehicle of any kind;<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>d.<span style=""> </span>Household personnel, such as maid, driver and others;<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>e.<span style=""> </span>Interest on loan at less than market rate to the extent of the difference between the market rate and actual rate granted;<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>f.<span style=""> </span>Membership fees, dues and other expenses borne by the employer for the employee in social and athletic clubs or other similar organizations;<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>g.<span style=""> </span>Expenses for foreign travel;<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>h.<span style=""> </span></span><st1:place><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">Holiday</span></st1:place><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"> and vacation expenses;<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>i.<span style=""> </span>Educational assistance to the employee or his dependents; and<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>j.<span style=""> </span>Life or health insurance and other non-life insurance premiums or similar amounts in excess of what the law allows.<span style=""> </span>[Sec. 33 (B), NIRC of 1997; 1<sup>st</sup> par., Sec. 2.33 (B), Rev. Regs. No. 3-98]<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><o:p> </o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span><span style=""> </span><b style="">14.<span style=""> </span>What fringe benefits are not subject to the fringe benefits tax ?<o:p></o:p></b></span></p> <p class="MsoNormal" style="text-align: justify;"><b style=""><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span></span></b><u><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">SUGGESTED ANSWER:</span></u><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>Fringe benefits that are not subject to the fringe benefits tax:<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>a.<span style=""> </span>When the fringe benefit is required by the nature of, or necessary to the trade, business or profession of the employer; or<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>b.<span style=""> </span>When the fringe benefit is for the convenience or advantage of the employer.<span style=""> </span>[Sec. 32(A), NIRC of 1997; 1<sup>st</sup> par., Sec. 2.33 (A), Rev. Regs. No. 3-98]<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>c.<span style=""> </span>Fringe benefits which are authorized and exempted from income tax under the Tax Code or under any special law;<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>d.<span style=""> </span>Contributions of the employer for the benefit of the employee to retirement, insurance and hospitalization benefit plans;<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>e.<span style=""> </span>Benefits given to the rank and file employees, whether granted under a collective bargaining agreement or not; and<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>f.<span style=""> </span><i style="">De minimis</i> benefits as defined in the rules and regulations to be promulgated by the Secretary of Finance upon recommendation of the Commissioner of Internal Revenue.<span style=""> </span>[1<sup>st</sup> par., Sec. 32 (C), NIRC of 1997; Sec. 2.33 (C), Rev. Regs. No. 3-98]<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><o:p> </o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span><b style=""><span style=""> </span>15.<span style=""> </span>What is meant by <i style="">de minimis </i>benefits ?<o:p></o:p></b></span></p> <p class="MsoNormal" style="text-align: justify;"><b style=""><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span></span></b><u><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">SUGGESTED ANSWER:</span></u><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span><i style="">De minimis </i>benefits are facilities and privileges (such as entertainment, medical services, or so-called “courtesy discounts” on purchases), furnished or offered by an employer to his employees.<span style=""> </span>They are not considered as compensation subject to income tax and consequently to withholding tax, if such facilities are offered or furnished by the employer merely as a means of promoting the health, goodwill, contentment, or efficiency of his employees.<span style=""> </span>[Sec. 2.78,1 (A) (3), Rev. Regs. 2-98 as amended by Rev. Regs. No. 8-2000]<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><o:p> </o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span><b style=""><span style=""> </span>16. What are the <i style="">de minimis </i>benefits not subject to withholding tax for both managerial and rank and file employees ?<o:p></o:p></b></span></p> <p class="MsoNormal" style="text-align: justify;"><b style=""><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span></span></b><u><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">SUGGESTED ANSWER:</span></u><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>The following shall be considered as <i style="">de minimis</i> benefits not subject to withholding tax on compensation income of both managerial and rank and file employees:<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>a.<span style=""> </span>Monetized unused vacation leave credits of employees not exceeding ten (10) days during the year;<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>b.<span style=""> </span>Medical cash allowance to dependents of employees not exceeding P750.00 per employee per semester or P125 per month;<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>c.<span style=""> </span>Rice subsidy of P1,000.00 or one (1) sack of 50-kg. rice per month amounting to not more than P1,000.00;<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>d.<span style=""> </span>Uniforms and clothing allowance not exceeding P3,000.00 per annum;<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>e.<span style=""> </span>Actual yearly medical benefits not exceeding P10,000.00 per annum;<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>f.<span style=""> </span>Laundry allowance not exceeding P300 per month;<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>g.<span style=""> </span>Employees achievement awards, e.g. for length of service or safety achievement, which must be in the form of a tangible persona property other than cash or gift certificate, with an annual monetary value not exceeding P10,000.00 received by an employee under an established written plan which does not discriminate in favor of highly paid employees;<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>h.<span style=""> </span>Gifts given during Christmas and major anniversary celebrations not exceeding P5,000 per employee per annum;<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>i.<span style=""> </span>Flowers, fruits, books, or similar items given to employees under special circumstances, e.g. on account of illness, marriage, birth of a baby, etc.; and<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>j.<span style=""> </span>Daily meal allowance for overtime work not exceeding twenty five percent (25%) of the basic minimum wage.<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>The amount of <i style="">de minimis</i><span style=""> </span>benefits conforming to the ceiling herein prescribed shall not be considered in determining the P30,000 ceiling of “other benefits” provided under Section 32 (B)(7)(e) of the Code.<span style=""> </span>However, if the employer pays more than the ceiling prescribed by these regulations, the excess shall be taxable to the employee receiving the benefits only if such excess is beyond the P30,000.00 ceiling, provided, further, that any amount given by the employer as benefits to its employees, whether classified as <i style="">de minimis</i> benefits or fringe benefits, shall constitute as deductible expense upon such employer.<span style=""> </span>[Sec. 2.78.1 (A) (3), Rev. Regs. 2-98 as amended by Rev. Regs. No. 8-2000]<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><o:p> </o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span><b style="">17.<span style=""> </span>What is meant by income subject to “final tax” ?<o:p></o:p></b></span></p> <p class="MsoNormal" style="text-align: justify;"><b style=""><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span></span></b><u><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">SUGGESTED ANSWER</span></u><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">:<span style=""> </span>Income subject to “final tax” refers to an income collected through the withholding tax system.<span style=""> </span><o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>The payor of the income withholds the tax and remits it to the government as a final settlement of the income tax as a final settlement of the income tax due on said income.<span style=""> </span>The recipient is no longer required to include the income subjected to a final tax as part of his gross income in his income tax return.<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span><span style=""> </span><o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify; text-indent: 0.5in;"><b style=""><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">18.<span style=""> </span><span style=""> </span>Disinguish exclusions from deductions.<o:p></o:p></span></b></p> <p class="MsoNormal" style="text-align: justify; text-indent: 0.5in;"><u><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">SUGGESTED ANSWER:</span></u><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"> Exclusions distinguished from deductions:<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify; text-indent: 0.5in;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">a.<span style=""> </span><span style=""> </span>Exclusions from gross income refer to a flow of wealth to the taxpayer which are not treated as part of gross income for purposes of computing the taxpayer’s taxable income, due to the following reasons:<span style=""> </span>(1)<span style=""> </span>It is exempted by the fundamental law;<span style=""> </span>(2)<span style=""> </span>It is exempted by statute; and (3) <span style=""> </span>It does not come within the definition of income<span style=""> </span>(Sec. 61, Rev. Regs. No. 2) WHILE deductions are the amounts which the law allows to be subtracted from gross income in order to arrive at net income.<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>b.<span style=""> </span><span style=""> </span>Exclusions pertain to the computation of gross income WHILE deductions pertain to the computation of net income.<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>c.<span style=""> </span><span style=""> </span>Exclusions are something received or earned by the taxpayer which do not form part of gross income WHILE deductions are something spent or paid in earning gross income.<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>An example of an exclusion from gross income are life insurance proceeds, and an example of a deduction are losses.<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><o:p> </o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span><b style="">19.<span style=""> </span>What proceeds are excluded from gross income ?<o:p></o:p></b></span></p> <p class="MsoNormal" style="text-align: justify;"><b style=""><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span></span></b><u><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">SUGGESTED ANSWER</span></u><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">:<span style=""> </span>The following are excluded from gross income:<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><b style=""><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span></span></b><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">a.<span style=""> </span><span style=""> </span>Proceeds of life insurance policies paid to the heirs or beneficiaries upon the death of the insured whether in a single sum or otherwise.<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>b.<span style=""> </span><span style=""> </span>Amounts received by the insured as a return of premiums paid by him under life insurance, endowment or annuity contracts either during the term, or at maturity of the term mentioned in the contract, or upon surrender of the contract.<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>c.<span style=""> </span><span style=""> </span>Value of property acquired by gift, bequest, devise, or descent.<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>d.<span style=""> </span>Amounts received, through accident or health insurance or Workmen’s Compensation Acts as compensation for personal injuries or sickness, plus the amounts of any damages received on whether by suit or agreement on account of such injuries or sickness.<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>e.<span style=""> </span><span style=""> </span>Income of any kind to the extent required by any treaty obligation binding upon the Government of the </span><st1:country-region><st1:place><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">Philippines</span></st1:place></st1:country-region><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">.<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>f.<span style=""> </span><span style=""> </span>Retirement benefits received under Republic Act No. 7641.<span style=""> </span>Retirement received from reasonable private benefit plan after compliance with certain conditions.<span style=""> </span>Amounts received for beyond control separation.<span style=""> </span>Foreign social security, retirement gratuities, pensions, etc.<span style=""> </span>USVA benefits, SSS benefits and GSIS benefits.<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><o:p> </o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span><b style="">20. What conditions must be present in order to exclude retirement benefits from gross income ?<o:p></o:p></b></span></p> <p class="MsoNormal" style="text-align: justify;"><b style=""><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span></span></b><u><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">SUGGESTED ANSWER:</span></u><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>Conditions for excluding retirement benefits from gross income, hence tax-exempt:<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify; text-indent: 0.5in;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">a.<span style=""> </span>Retirement benefits received under Republic Act No. 7641 and those received by officials and employees of private firms, whether individual or corporate, in accordance with the employer’s reasonable private benefit plan approved by the BIR.<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify; text-indent: 0.5in;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">b.<span style=""> </span>Retiring official or employee<o:p></o:p></span></p> <p class="MsoNormal" style="margin-left: 0.5in; text-align: justify; text-indent: 0.5in;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">1)<span style=""> </span>In the service of the same employer for at least ten (10) years;<o:p></o:p></span></p> <p class="MsoNormal" style="margin-left: 0.5in; text-align: justify; text-indent: 0.5in;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">2)<span style=""> </span>Not less than fifty (50) years of age at time of retirement;<o:p></o:p></span></p> <p class="MsoNormal" style="margin-left: 0.5in; text-align: justify; text-indent: 0.5in;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">3)<span style=""> </span>Availed of the benefit of exclusion only once.<span style=""> </span>[Sec. 32 (B) (6) (a), NIRC of 1997] The retiring official or employee should not have previously availed of the privilege under the retirement plan of the same or another employer.<span style=""> </span>[1<sup>st</sup> par., Sec. 2.78 (B) (1), Rev. Regs. No. 2-98]<o:p></o:p></span></p> <p class="MsoNormal" style="margin-left: 0.5in; text-align: justify; text-indent: 0.5in;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><o:p> </o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span><span style=""> </span><b style="">21.<span style=""> </span>What kind of separation pay is excluded from gross income ?<o:p></o:p></b></span></p> <p class="MsoNormal" style="text-align: justify;"><b style=""><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span></span></b><u><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">SUGGESTED ANSWER:</span></u><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>Separation (retirement) pay excluded from gross income, hence tax-exempt:<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>a.<span style=""> </span>Any amount received by an official, employee or by his heirs,<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>b.<span style=""> </span>From the employer<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify; text-indent: 0.5in;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">c.<span style=""> </span>As a consequence of separation of such official or employee from the service of the employer because of<o:p></o:p></span></p> <p class="MsoNormal" style="margin-left: 0.5in; text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>1)<span style=""> </span>Death, sickness or other physical disability; or<o:p></o:p></span></p> <p class="MsoNormal" style="margin-left: 0.5in; text-align: justify; text-indent: 0.5in;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">2)<span style=""> </span>For any cause beyond the control of said official or employee [Sec. 32 (B) (6) (b), NIRC of 1997], such as retrenchment, redundancy and cessation of business.<span style=""> </span>[1<sup>st</sup> par., Sec. 2.78 (B), (1) (b), Rev. Regs. No. 2-98]<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><o:p> </o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span><b style="">22.<span style=""> </span>What prizes are excluded from gross income ?<o:p></o:p></b></span></p> <p class="MsoNormal" style="text-align: justify;"><b style=""><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span></span></b><u><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">SUGGESTED ANSWER:</span></u><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>Prizes that are excluded from gross income, hence not taxable:<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>a.<span style=""> </span>Prizes and awards made primarily in recognition of religious, charitable, scientific, educational, artistic, literary, or civic achievement but only if<o:p></o:p></span></p> <p class="MsoNormal" style="margin-left: 0.5in; text-align: justify; text-indent: 0.5in;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">1)<span style=""> </span>The recipient was selected without any action on his part to enter the contest or proceeding; and<o:p></o:p></span></p> <p class="MsoNormal" style="margin-left: 0.5in; text-align: justify; text-indent: 0.5in;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">2)<span style=""> </span>The recipient is not required to render substantial future services as a condition to receiving the prize or award.<span style=""> </span>[Sec. 32 (B) {7} {c}, NIRC of 1997]<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>b.<span style=""> </span>All prizes and awards<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>1)<span style=""> </span>Granted to athletes<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>2)<span style=""> </span>In local and international sports tournaments and competitions<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>3)<span style=""> </span>Whether held in the </span><st1:country-region><st1:place><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">Philippines</span></st1:place></st1:country-region><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"> or abroad, and<o:p></o:p></span></p> <p class="MsoNormal" style="margin-left: 0.5in; text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>4)<span style=""> </span>Sanctioned by their national sports associations [Sec. 32(B) {7} {d}, NIRC of 1997], which per BIR ruling is accreditation with the Philippine Olympic Committee. Note that the exemption refers only to amateur sports.<span style=""> </span>For professional boxing, a special law grants the exemption not the NIRC.<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><o:p> </o:p></span></p> <p class="MsoNormal" style="text-align: justify; text-indent: 0.5in;"><b style=""><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">23.<span style=""> </span>Who are allowed to deduct the optional standard deduction ?<o:p></o:p></span></b></p> <p class="MsoNormal" style="text-align: justify; text-indent: 0.5in;"><u><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">SUGGESTED ANSWER:</span></u><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>Only resident citizens and resident alien individuals are allowed to deduct the optional standard deduction on their gross income other than passive or compensation income.<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>Nonresident individuals, estates, trusts or corporations are not allowed to avail of this deduction.<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><o:p> </o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span><b>24.</b><span style=""> </span><span style=""> </span><b style="">What is the optional standard deduction ?<o:p></o:p></b></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><o:p> </o:p></span></p> <p><span style="font-size: 10.5pt; font-family: Arial;" lang="EN">Sec. 34. Deductions from Gross Income. – Except for taxpayers earning compensation income arising from personal services rendered under an employer-employee relationship where no deductions shall be allowed under this Section other than under Section (M) hereof, in computing taxable income subject to income tax under Sections 24(A); 25(A); 26; 27(A), (B) and (C); and 28(A)(1) there shall be allowed the following deductions from gross income:<o:p></o:p></span></p> <p><span style="font-size: 10.5pt; font-family: Arial;" lang="EN">“(A) Expenses. – <o:p></o:p></span></p> <p><span style="font-size: 10.5pt; font-family: Arial;" lang="EN">“x x x<o:p></o:p></span></p> <p><span style="font-size: 10.5pt; font-family: Arial;" lang="EN">“(L) Optional Standard Deduction. – In lieu of the deductions allowed under the preceding Subsections, an individual subject to tax under Section 24, other than nonresident alien, may elect a standard deduction in an amount not exceeding forty percent (40%) of his gross sales or gross receipts, as the case may be. In the case of a corporation subject to tax under Sections 27(A) and 28(A)(1), it may elect a standard deduction in an amount not exceeding forty percent (40%) of its gross income as defined in Section 32 of this Code. Unless the taxpayer signifies in his return his intention to elect the optional standard deduction, he shall be considered as having availed himself of the deductions allowed in the preceding Subsections. Such election when made in the return shall irrevocable for the taxable year for which the return is made. Provided, That an individual who is entitled to an claimed for the optional standard deduction shall not be required to submit with his tax return such financial statements otherwise required under this Code: Provided, further, That except when the Commissioner otherwise permits the said individual shall keep such records pertaining to this gross sales or gross receipts, or the said corporation shall keep such records pertaining to this gross income as defined in Section 32 of this Code during the taxable year, as may be required by the rules and regulations promulgated by the Secretary of Finance, upon recommendation of the Commissioner. (Sec. 34, NIRC of 1997 as amended by R.A. No. 9504)<o:p></o:p></span></p> <p><span style="font-size: 10.5pt; font-family: Arial;" lang="EN">“(M) x x x. – <o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><o:p> </o:p></span></p> <p class="MsoNormal" style="text-align: justify; text-indent: 0.5in;"><b style=""><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">25.<span style=""> </span>What are the allowed itemized deductions from gross income ?<o:p></o:p></span></b></p> <p class="MsoNormal" style="text-align: justify; text-indent: 0.5in;"><u><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">SUGGESTED ANSWER:</span></u><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>Itemized deductions from gross income:<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify; text-indent: 0.5in;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">a.<span style=""> </span><b style="">Ordinary and necessary</b> trade, business or professional <b style="">expenses</b>.<span style=""> </span><o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify; text-indent: 0.5in;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">b.<span style=""> </span>The amount of <b style="">interest </b>paid or incurred within a taxable year on indebtedness in connection with the taxpayer’s profession, trade or business.<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify; text-indent: 0.5in;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">Resident citizens, resident alien individuals and nonresident alien individuals who are engaged in trade and business,<span style=""> </span>on their gross incomes other from compensation income are allowed to deduct these expenses.<span style=""> </span>Domestic corporations, estates and trusts may also deduct this expense.<span style=""> </span>Nonresident citizens and foreign corporations on their gross incomes from within may also deduct this expense.<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify; text-indent: 0.5in;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">Nonresident alien individuals not engaged in trade or business in the </span><st1:country-region><st1:place><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">Philippines</span></st1:place></st1:country-region><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"> are not allowed to deduct this expense.<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify; text-indent: 0.5in;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">c.<span style=""> </span><b style="">Taxes</b> paid or incurred within the taxable year in connection with the taxpayer’s profession.<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify; text-indent: 0.5in;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">Resident citizens, resident alien individuals and nonresident alien individuals who are engaged in trade and business,<span style=""> </span>on their gross incomes other from compensation income are allowed to deduct these expenses.<span style=""> </span>Domestic corporations, estates and trusts may also deduct this expense.<span style=""> </span>Nonresident citizens and foreign corporations on their gross incomes from within may also deduct this expense.<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify; text-indent: 0.5in;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">Nonresident alien individuals not engaged in trade or business in the </span><st1:country-region><st1:place><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">Philippines</span></st1:place></st1:country-region><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"> are not allowed to deduct this expense.<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify; text-indent: 0.5in;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">d.<span style=""> </span>Ordinary <b style="">losses</b>, losses from casualty, theft or embezzlement; and net operating losses.<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify; text-indent: 0.5in;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">Resident citizens, resident alien individuals and nonresident alien individuals who are engaged in trade and business,<span style=""> </span>on their gross incomes other from compensation income are allowed to deduct these expenses.<span style=""> </span>Domestic corporations, estates and trusts may also deduct this expense.<span style=""> </span>Nonresident citizens and foreign corporations on their gross incomes from within may also deduct this expense.<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify; text-indent: 0.5in;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">Nonresident alien individuals not engaged in trade or business in the Philippines are not allowed to deduct this expense.<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify; text-indent: 0.5in;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">e.<span style=""> </span><b style="">Bad debts</b> due to the taxpayer, actually ascertained to be worthless and charged off within the taxable year, connected with profession, trade or business, not sustained between related parties.<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify; text-indent: 0.5in;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">Resident citizens, resident alien individuals and nonresident alien individuals who are engaged in trade and business,<span style=""> </span>on their gross incomes other from compensation income are allowed to deduct these expenses.<span style=""> </span>Domestic corporations, estates and trusts may also deduct this expense.<span style=""> </span>Nonresident citizens and foreign corporations on their gross incomes from within may also deduct this expense.<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify; text-indent: 0.5in;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">Nonresident alien individuals not engaged in trade or business in the Philippines are not allowed to deduct this expense.<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify; text-indent: 0.5in;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">f.<span style=""> </span><b style="">Depreciation</b> or a reasonable allowance for the exhaustion, wear and tear (including reasonable allowance for obsolescence) of property used in trade or business.<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify; text-indent: 0.5in;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">Resident citizens, resident alien individuals and nonresident alien individuals who are engaged in trade and business,<span style=""> </span>on their gross incomes other from compensation income are allowed to deduct these expenses.<span style=""> </span>Domestic corporations, estates and trusts may also deduct this expense.<span style=""> </span>Nonresident citizens and foreign corporations on their gross incomes from within may also deduct this expense.<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify; text-indent: 0.5in;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">Nonresident alien individuals not engaged in trade or business in the Philippines are not allowed to deduct this expense.<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify; text-indent: 0.5in;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">g.<span style=""> </span><b style="">Depletion</b> or deduction arising from the exhaustion of a non-replaceable asset, usually a natural resource.<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify; text-indent: 0.5in;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">Resident citizens, resident alien individuals and nonresident alien individuals who are engaged in trade and business,<span style=""> </span>on their gross incomes other from compensation income are allowed to deduct these expenses.<span style=""> </span>Domestic corporations, estates and trusts may also deduct this expense.<span style=""> </span>Nonresident citizens and foreign corporations on their gross incomes from within may also deduct this expense.<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify; text-indent: 0.5in;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">Nonresident alien individuals not engaged in trade or business in the Philippines are not allowed to deduct this expense.<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify; text-indent: 0.5in;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">h.<span style=""> </span><b style="">Charitable </b>and other <b style="">contributions</b>. Resident citizens, resident alien individuals and nonresident alien individuals who are engaged in trade and business,<span style=""> </span>on their gross incomes other from compensation income are allowed to deduct these expenses.<span style=""> </span>Domestic corporations, estates and trusts may also deduct this expense.<span style=""> </span>Nonresident citizens and foreign corporations on their gross incomes from within may also deduct this expense.<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify; text-indent: 0.5in;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">Nonresident alien individuals not engaged in trade or business in the Philippines are not allowed to deduct this expense.<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify; text-indent: 0.5in;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">i.<span style=""> </span><b style="">Research and development</b> expenditures treated as deferred expenses paid or incurred by the taxpayer in connection with his trade, business or profession, not deducted as expenses and chargeable to capital account but not chargeable to property of a character which is subject to depreciation or depletion.<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify; text-indent: 0.5in;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">Resident citizens, resident alien individuals and nonresident alien individuals who are engaged in trade and business,<span style=""> </span>on their gross incomes other from compensation income are allowed to deduct these expenses.<span style=""> </span>Domestic corporations, estates and trusts may also deduct this expense.<span style=""> </span>Nonresident citizens and foreign corporations on their gross incomes from within may also deduct this expense.<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify; text-indent: 0.5in;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">Nonresident alien individuals not engaged in trade or business in the Philippines are not allowed to deduct this expense.<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify; text-indent: 0.5in;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">j.<span style=""> </span><b style="">Contributions<span style=""> </span>to pension trusts</b>. Resident citizens, resident alien individuals and nonresident alien individuals who are engaged in trade and business,<span style=""> </span>on their gross incomes other from compensation income are allowed to deduct these expenses.<span style=""> </span>Domestic corporations, estates and trusts may also deduct this expense.<span style=""> </span>Nonresident citizens and foreign corporations on their gross incomes from within may also deduct this expense.<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify; text-indent: 0.5in;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">Nonresident alien individuals not engaged in trade or business in the Philippines are not allowed to deduct this expense.<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify; text-indent: 0.5in;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">k.<span style=""> </span><span style=""> </span><b style="">Insurance premiums</b> for health and hospitalization. Resident citizens, resident alien individuals and nonresident alien individuals who are engaged in trade and business,<span style=""> </span>on their gross incomes other from compensation income are allowed to deduct these expenses. Nonresident citizens and nonresident alien individual engaged in trade or business in the Philippine on their gross incomes from within may also deduct these premiums.<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify; text-indent: 0.5in;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">Nonresident alien individuals not engaged in trade or business in the Philippines are not allowed to deduct these premiums.<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify; text-indent: 0.5in;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">l.<span style=""> </span><b style="">Personal and additional exemptions</b>. Resident citizens, and resident alien on their gross incomes and from compensation income are allowed to deduct these premiums. Nonresident citizens on their gross incomes from within may also deduct this expense.<span style=""> </span>Nonresident alien individuals engaged in trade or business in the Philippines are allowed to deduct these exemptions under reciprocity.<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify; text-indent: 0.5in;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">Nonresident alien individuals not engaged in trade or business in the Philippines are not allowed to deduct this expense.<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify; text-indent: 0.5in;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><o:p> </o:p></span></p> <p class="MsoNormal" style="text-align: justify; text-indent: 0.5in;"><b style=""><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">26.<span style=""> </span>What are extraordinary deductions ?<o:p></o:p></span></b></p> <p class="MsoNormal" style="text-align: justify; text-indent: 0.5in;"><u><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">SUGGESTED ANSWER:</span></u><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span><b style=""><span style=""> </span></b>Extraordinary deductions<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>a.<span style=""> </span>Those allowed to insurance companies<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify; text-indent: 0.5in;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">b.<span style=""> </span>Deductions allowed to estates and trusts availing of itemized deductions of income currently distributed to beneficiaries.<o:p></o:p></span></p> <p class="MsoNormal" style="margin-left: 0.5in; text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">c.<span style=""> </span>Losses from wash sales of stocks or securities.<o:p></o:p></span></p> <p class="MsoNormal" style="margin-left: 0.5in; text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">d.<span style=""> </span>Certain capital losses but only from capital gains.<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span><o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span><o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><o:p> </o:p></span></p> <p class="MsoNormal" style="text-align: justify; text-indent: 0.5in;"><b style=""><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">27.<span style=""> </span>What are ordinary expenses ?<o:p></o:p></span></b></p> <p class="MsoNormal" style="text-align: justify; text-indent: 0.5in;"><u><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">SUGGESTED ANSWER:</span></u><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>Ordinary expenses are those which are common to incur in the trade or business of the taxpayer WHILE capital expenditures are those incurred to improve assets and benefits for more than one taxable year.<span style=""> </span>Ordinary expenses are usually incurred during a taxable year and benefits such taxable year.<span style=""> </span>Necessary expenses are those which are appropriate or helpful to the business.<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify; text-indent: 0.5in;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><o:p> </o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span><b style="">28. What are the requisites for the deductibility of business expenses ?<o:p></o:p></b></span></p> <p class="MsoNormal" style="text-align: justify;"><b style=""><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span></span></b><u><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">SUGGESTED ANSWER:</span></u><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>The following are the requisites for deductibility of business expenses:<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>a.<span style=""> </span><span style=""> </span>Compliance with the business test:<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>1)<span style=""> </span><span style=""> </span>Must be ordinary and necessary;<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>2)<span style=""> </span><span style=""> </span>Must be paid or incurred within the taxable <span style=""> </span>year;<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>3)<span style=""> </span><span style=""> </span>Must be paid or incurred in carrying on a <span style=""> </span>trade or business.<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>4)<span style=""> </span><span style=""> </span>Must not be bribes, kickbacks or other illegal <span style=""> </span>expenditures<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>b.<span style=""> </span><span style=""> </span>Compliance with the substantiation test.<span style=""> </span>Proof by evidence or records of the deductions allowed by law including compliance with the business test.<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span><o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span><b style="">29.<span style=""> </span>What kind of advertising expenses are not deductible ?<span style=""> </span>Why ?<o:p></o:p></b></span></p> <p class="MsoNormal" style="text-align: justify;"><b style=""><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span></span></b><u><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">SUGGESTED ANSWER:</span></u><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>Advertising expenses not designed to stimulate the future sale of merchandise are not deductible<span style=""> </span>These are expenditures in order to create or maintain some form of goodwill. These expenditures are to be spread over a reasonable period of time because they are considered that a capital asset which has a determinable life has been acquired.<span style=""> </span><i style="">(General Foods [Phils.], Inc. v. Commissioner of Internal Revenue, CTA Case No. 4386, February 8, 1994)<o:p></o:p></i></span></p> <p class="MsoNormal" style="text-align: justify;"><i style=""><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><o:p> </o:p></span></i></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span><b style="">30. What kind of advertising expenses are considered as capital investments ?<o:p></o:p></b></span></p> <p class="MsoNormal" style="text-align: justify;"><b style=""><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span></span></b><u><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">SUGGESTED ANSWER:</span></u><b style=""><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"> </span></b><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">Expenses incurred to create a favorable image for the corporation to generate sales of its shares of stock constitute capital investment because the particular advertising expense was incurred in relation to the capital asset or equity of the company<span style=""> </span><i style="">(Atlas Consolidated Mining and Development Corporation v. Commissioner of Internal Revenue, </i>102 SCRA 246<i style="">),</i> and are to be capitalized or spread over a reasonable period.<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><o:p> </o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><b style=""><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>31.<span style=""> </span></span></b><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">Entertainment, Amusement and Recreation Expenses,<b style=""> </b>include “representation expenses and/or depreciation or rental expense relating to entertainment facilities.”<span style=""> </span>(1<sup>st</sup> par., Sec. 2, Rev. Regs. 110-2002)<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><b style=""><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><o:p> </o:p></span></b></p> <p class="MsoNormal" style="text-align: justify;"><b style=""><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>32.<span style=""> </span></span></b><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">Representation<span style=""> </span>expenses,<b style=""><span style=""> </span></b><span style=""> </span>shall “refer to expenses incurred by a taxpayer in connection with the conduct of his trade, business or exercise of profession, in entertaining, providing amusement and recreation to, or meeting with a guest or guests at a dining place, place of amusement, country club, theater, concert, play, sporting event, and similar events or places.”<span style=""> </span>(2<sup>nd</sup> par., Sec. 2, Rev. Regs. 10-2002)<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>Representation expenses “shall not refer to fixed representation allowances that are subject to withholding tax on wages pursuant to appropriate revenue regulations.”<span style=""> </span>(<i style="">Ibid.</i>)<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><o:p> </o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><b style=""><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>33.<span style=""> </span>Club dues, when fringe benefits and when representation expenses.</span></b><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"> <b style=""><span style=""> </span></b><span style=""> </span>“In the case particularly of a country, golf, sports club, or any other similar club where the employee or officer of the taxpayer is the registered member and the expenses incurred in relation thereto are paid for by the taxpayer, there shall be a presumption that such expenses are fringe benefits subject to fringe benefits tax unless the taxpayer can prove that these are actually representation expenses.<span style=""> </span>For purpose of proving that the said expense is a representation expense and not fringe benefits, the taxpayer should maintain receipts and<span style=""> </span>adequate records that indicate <o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span><span style=""> </span>a)<span style=""> </span>the amount of expense<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span><span style=""> </span><span style=""> </span>b)<span style=""> </span>date and place of expense<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span><span style=""> </span><span style=""> </span>c)<span style=""> </span>purpose of expense<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span><span style=""> </span><span style=""> </span>d)<span style=""> </span>professional or business relationship of expense<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span><span style=""> </span><span style=""> </span>d)<span style=""> </span>professional or business relationship of expense<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span><span style=""> </span><span style=""> </span>e)<span style=""> </span>name of person and company entertained with con-tact details.”<span style=""> </span>(2<sup>nd</sup> par., Sec. 2, Rev. Regs. 10-2002)<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span><b style="">34.<span style=""> </span>Dues paid by company officers to any one club deductible by employer as business expense but not as representation or entertainment:<o:p></o:p></b></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>a.<span style=""> </span>Dues paid to any one social, athletic, or sporting club or organization per officer may be deductible as a business expense.<span style=""> </span>However, purchase of proprietary shares and playing rights and expenses in the said club or organization may be deductible only if said expense complies with the rules on substantiation.<span style=""> </span>Dues on company membership constitute deductible expense.<span style=""> </span>(No. 3.4.2, RAMO No. 1-87)<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>b.<span style=""> </span>Dues or fees paid to professional or business organizations and civic clubs such as Lions, Rotary, <i style="">Kiwanis </i>shall be deductible to the employer to the extent of one club. (No. 3.4.3, RAMO No. 1-87)<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span><span style=""> </span>The above provisions of RAMO No. 1-87 are to be read in relation to the provisions of Rev. Regs. No. 10-2002. <i style=""><span style=""> </span></i><span style=""> </span>If considered as a fringe benefit subject to the fringe benefits tax under Sec. 33, NIRC of 1997, may be deductible from the employer's gross income.<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><o:p> </o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><b style=""><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>35.<span style=""> </span></span></b><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>Entertainment facilities shall “refer to (1) a yacht, vacation home or condominium; and 2)<span style=""> </span>any similar item of real or personal property used by the taxpayer primarily for the entertainment, amusement, or recreation of guests or employees.<span style=""> </span>To be considered an entertainment facility, such yacht, vacation home or condominium, or item of real or personal property must be owned or form part of the taxpayer’s trade, business or profession, or rented by such taxpayer, for which the taxpayer claims a depreciation or rental expense.<span style=""> </span>A yacht shall be considered an entertainment facility if its use is in fact not restricted to specified officers or employees or positions in such a manner as to make the same a fringe benefit for purposes of imposing the fringe benefits tax.”<span style=""> </span>(4th par., Sec. 2, Rev. Regs. 10-2002)<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><o:p> </o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><b style=""><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>36.<span style=""> </span></span></b><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">Guests shall mean “persons or entities with which the taxpayer has direct business relations, such as but not limited to, clients/customers or prospective clients/customers.<span style=""> </span>The term shall not include employees, officers, partners, directors, stockholders, or trustees of the taxpayer.”<span style=""> </span>(last par., Sec. 2, Rev. Regs. No. 10-2002)<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><o:p> </o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><b style=""><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>37.<span style=""> </span>What expenses are not considered as entertainment, amusement and recreational expenses ?<o:p></o:p></span></b></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span><u>SUGGESTED ANSWER:<b style=""><o:p></o:p></b></u></span></p> <p class="MsoNormal" style="text-align: justify;"><b style=""><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span></span></b><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">a.<span style=""> </span><span style=""> </span>Expenses which are treated as compensation or fringe benefits for services rendered under an employer-employee relationship;<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span><span style=""> </span>b.<span style=""> </span><span style=""> </span>Expenses for charitable or fund raising events;<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>c.<span style=""> </span><span style=""> </span>Expenses for bona fide business meeting of stock-holders, partners or directors;<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>d.<span style=""> </span><span style=""> </span>Expenses for attending or sponsoring an employee to a business league or professional organizational meeting;<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>e.<span style=""> </span><span style=""> </span>Expenses organized for promotion, marketing and advertising including concerts, conferences, seminars, workshops, conventions, and other similar events;<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span><span style=""> </span>f.<span style=""> </span><span style=""> </span>Other expenses of similar nature.<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>Notwithstanding the foregoing such items of exclusions may, nonetheless qualify as items of deduction under Section 34 of the Tax Code of 1997, subject to conditions for deductibility stated therein.<span style=""> </span>(Sec. 3, Rev. Regs. No. 10-2002)<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><b style=""><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span></span></b><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span><span style=""> </span><b style="">38.<span style=""> </span></b>Reimbursements for expenses relating to entertainment shall be deductible by the employer if<span style=""> </span><o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span><span style=""> </span>a.<span style=""> </span>Used primarily for the furtherance of employer’s trade or business <o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>b.<span style=""> </span>Only to the extent allowable, the same is directly related to the active conduct of the employer’s trade or business and <o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span><span style=""> </span>c.<span style=""> </span>Subject to the rule of substantiation.. (No. 3.4.1, RAMO No. 1-87)<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>If considered as a fringe benefit subject to the fringe benefits tax under Sec. 33, NIRC of 1997, may be deductible from the employer's gross income.<span style=""> </span>Refer to previous discussion for limitations.<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><i style=""><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><o:p> </o:p></span></i></p> <p class="MsoBodyTextIndent2" style="margin-left: 0in;"><b style=""><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>39.<span style=""> </span></span></b><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">Representation expenses fall under the category of business expenses which are allowable deductions, if they are ordinary and necessary; paid or incurred in carrying on a trade or business; and they are reasonable.<span style=""> </span><i style="">(Zamora v. Col. of Int. Revenue, 8 SCRA 163 cited in Paramount Insurance Corporation v. Commissioner of Internal Revenue, CTA Case No. 4844,. June 7, 1996)<o:p></o:p></i></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span><span style=""> </span>If treated as a fringe benefit, subject to the fringe benefits tax under Sec. 33, NIRC of 1997, it may be allowed as a deduction from the employer's gross income. <o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><i style=""><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><o:p> </o:p></span></i></p> <p class="MsoNormal" style="text-align: justify;"><b style=""><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>40.<span style=""> </span></span></b><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">Representation expenses not supported by official receipts should be disallowed.<span style=""> </span>Mere receipts when signed by the company officers themselves are not sufficient, for while they may show that they received the amount from the company, they do not prove payment of the alleged representation expenses to the entity in which the same were incurred.<span style=""> </span>Furthermore, the absence of invoices receipts or vouchers, particularly lack of proof of the items constituting the expense is fatal to the allowance of the deduction.<span style=""> </span><i style="">(Paramount Insurance Corporation v. Commissioner of Internal Revenue, CTA Case No. 4844, June 7, 1996 citing Collector of Internal Revenue v. Goodrich Int. Rubber Co., 21 SCRA 1336 and Gancayco v. Collector of Internal Revenue, 1 SCRA 980)<o:p></o:p></i></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><o:p> </o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span><b style="">41.<span style=""> </span>What are the requisites for deductibility of<span style=""> </span>an “entertainment, amusement and recreation” expense ?<o:p></o:p></b></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span><u>SUGGESTED ANSWER:</u><span style=""> </span><o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><b style=""><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span></span></b><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">a.<span style=""> </span><span style=""> </span>It must be a reasonable allowance for entertainment, amusement and recreation expenses [Sec. 34 (A) (1) (iv), NIRC of 1997];<b style=""><o:p></o:p></b></span></p> <p class="MsoNormal" style="text-align: justify;"><b style=""><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span></span></b><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>b.<span style=""> </span><span style=""> </span>It must be paid or incurred during the taxable year;<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span><span style=""> </span>c.<span style=""> </span><span style=""> </span>It must be<o:p></o:p></span></p> <p class="MsoNormal" style="margin-left: 0.5in; text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>1)<span style=""> </span>directly connected to the development, management and operation of the trade, business or profession of the taxpayer, or<o:p></o:p></span></p> <p class="MsoNormal" style="margin-left: 0.5in; text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>2)<span style=""> </span>directly related to or in furtherance of the conduct of its trade, business or exercise of a profession;<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>d.<span style=""> </span><span style=""> </span>It must not be contrary to law, morals, good customs, public policy or public order;<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>e.<span style=""> </span><span style=""> </span>It must not have been paid, directly or indirectly, to an official or employee of the national government, or any local government unit, or of any government-owned or controlled corporation (GOCC), or of a foreign government, or to a private individual, or corporation, or general professional partnership (GPP), or a similar entity, if it constitutes a bribe, kickback or other similar payment;<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>f.<span style=""> </span><span style=""> </span>It must be duly substantiated by adequate proof.<span style=""> </span>The official receipts, or invoices, or bills or statements of accounts should be in the name of the taxpayer claiming the deduction; and<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>g.<span style=""> </span>The appropriate amount of withholding tax, if applicable, should have withheld therefrom and paid to the Bureau of Internal Revenue.<span style=""> </span>(Sec. 4, Rev. Regs. No. 10-2002)<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><b style=""><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span></span></b><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">i. <span style=""> </span><span style=""> </span>It must conform to the following ceilings:<o:p></o:p></span></p> <p class="MsoNormal" style="margin-left: 0.5in; text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>1)<span style=""> </span>in an amount equivalent to the actual entertainment, amusement and recreation expense paid or incurred within the taxable year by the taxpayer,<o:p></o:p></span></p> <p class="MsoNormal" style="margin-left: 0.5in; text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span><span style=""> </span>2)<span style=""> </span>but in no case shall such deduction exceed 0.50 percent (.5%) of net sales (i.e. gross sales less sales returns/allowances and sales discounts) for taxpayers engaged in sale of goods or properties; or<o:p></o:p></span></p> <p class="MsoNormal" style="margin-left: 0.5in; text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span><span style=""> </span>3)<span style=""> </span>1.00 percent (1%) of net revenue (i.e., gross revenue less discounts) for taxpayers engaged in sale of services, including exercise of profession and use or lease of properties.<o:p></o:p></span></p> <p class="MsoNormal" style="margin-left: 0.5in; text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span><span style=""> </span>4)<span style=""> </span>However, if the taxpayer is deriving income from both sale of goods/properties and services, the allowable entertainment, amusement and recreation expense shall in all cases be determined based on an apportionment formula taking into consideration the percentage of the net sales/net revenue to the total net sales/net revenue, but which in no case shall exceed the maximum percentage ceiling.<span style=""> </span>(Sec. 5, <i style="">Ibid.</i>)<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><o:p> </o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><b style=""><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>42.<span style=""> </span>Who are allowed to deduct entertainment, amusement and recreation expenses ?<o:p></o:p></span></b></p> <p class="MsoNormal" style="text-align: justify;"><b style=""><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span></span></b><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">a.<span style=""> </span><span style=""> </span>Individuals engaged in trade or business, including taxable estates and trusts;<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span><span style=""> </span><span style=""> </span>b. <span style=""> </span><span style=""> </span>Individuals engaged in the practice of profession;<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span><span style=""> </span>c.<span style=""> </span><span style=""> </span>Domestic corporations;<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>d.<span style=""> </span><span style=""> </span>Resident foreign corporations;<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span><span style=""> </span>e.<span style=""> </span><span style=""> </span>General professional partnerships.<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><o:p> </o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><o:p> </o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span><b style="">43. Are dividends or “interests” on preferred shares deductible from gross income ?<span style=""> </span><o:p></o:p></b></span></p> <p class="MsoNormal" style="text-align: justify;"><b style=""><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span></span></b><u><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">SUGGESTED ANSWER:</span></u><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>Preferred shares are considered capital regardless of the conditions under which such shares are issued and dividends or “interests” paid thereon are not allowed as deductions from the gross income of corporations.<span style=""> </span>(Revenue Memorandum Circular No. 17-71)<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><o:p> </o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><b style=""><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>44.<span style=""> </span></span></b><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">In addition to the expenses allowable as deductions a private educational institution, may at its option elect either:<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>a.<span style=""> </span>To deduct expenditures otherwise considered as capital outlays of depreciable assets incurred during the taxable year for the expansion of school facilities, or<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>b.<span style=""> </span>To deduct allowance for depreciation thereof.<span style=""> </span>[Sec. 34 (A) (2), NIRC of 1997]<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><o:p> </o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span><b style="">45.<span style=""> </span></b>Financial statements audited by in dependent external auditors constitute the normal method of proof of the profit and loss performance of a company.<span style=""> </span>A comparative statement of revenue and expenses for two years, by itself, is not conclusive proof of serious business losses.<span style=""> </span><i style="">(Bogo-Medellin Sugarcane Planters Association, Inc. v. NLRC, et al., 296 SCRA 108, 121)<o:p></o:p></i></span></p> <p class="MsoNormal" style="text-align: justify;"><i style=""><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span><o:p></o:p></span></i></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span><b style="">46.<span style=""> </span>Define bad debts.<o:p></o:p></b></span></p> <p class="MsoNormal" style="text-align: justify;"><b style=""><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span></span></b><u><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">SUGGESTED ANSWER:</span></u><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>Bad debts are those which result from the worthlessness or uncollectibility, in whole or in part, of amounts due the taxpayer by others, arising from money lent or from uncollectible amounts of income from goods sold or services rendered.<span style=""> </span>(Sec. 2.a, Rev. Regs. 5-99)<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><o:p> </o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><o:p> </o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span><b style=""><span style="letter-spacing: -0.1pt;">47</span></b><span style="letter-spacing: -0.1pt;">.<span style=""> </span><b style="">What are the requisites for a valid deduction of bad debts from gross income ?<o:p></o:p></b></span></span></p> <p class="MsoNormal" style="text-align: justify;"><b style=""><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span></span></b><u><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US">SUGGESTED ANSWER:<o:p></o:p></span></u></p> <p class="MsoNormal" style="text-align: justify;"><b style=""><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span><span style=""> </span></span></b><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US">a.<span style=""> </span><span style=""> </span>There must be an existing indebtedness due to the taxpayer which must be valid and legally demandable;<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span><span style=""> </span>b.<span style=""> </span><span style=""> </span>The same must be connected with the taxpayer’s trade, business or practice of profession;<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span><span style=""> </span><span style=""> </span>c.<span style=""> </span><span style=""> </span>The same must not be sustained in a transaction entered into between related parties;<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span><span style=""> </span>d.<span style=""> </span><span style=""> </span>The same must be actually charged off the books of accounts of the taxpayer as of the end of the taxable year; and<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span><span style=""> </span>e.<span style=""> </span><span style=""> </span>The<span style=""> </span>debt<span style=""> </span>must<span style=""> </span>be<span style=""> </span>actually<span style=""> </span>ascertained to be worthless and uncollectible during the taxable year;<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span><span style=""> </span>f. <span style=""> </span>The debts<span style=""> </span>are<span style=""> </span>uncollectible despite diligent effort exerted by the taxpayer.<span style=""> </span>[Sec. 34 (E) (1), NIRC of 1997; Sec. 3, Rev. Regs. No. 5-99 reiterated in Rev. Regs. No. 25-2002; <i style="">Philippine Refining Corporation v. Court of Appeals, et al., 256 SCRA 667</i>]<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span><span style=""> </span>g.<span style=""> </span><span style=""> </span>Must have been reported as receivables in the income tax return of the current or prior years.<span style=""> </span>(Sec. 103, Rev. Regs. No. 2)<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span><u><o:p></o:p></u></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span><b style="">48.<span style=""> </span>Who are related parties ?</b><u><o:p></o:p></u></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span><u>SUGGESTED ANSWER:</u><span style=""> </span>The following are related parties:<u><o:p></o:p></u></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>a.<span style=""> </span><span style=""> </span>Members of the same family.<span style=""> </span>The family of an individual shall include only his brothers and sisters (whether by the whole or half-blood), spouse, ancestors, and lineal descendants;<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>b.<span style=""> </span><span style=""> </span>A corporation more than fifty percent (50%) in value of the outstanding stock of which is owned, directly or indirectly, by or for such individual;<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>c.<span style=""> </span><span style=""> </span>Two corporations more than fifty percent (50%) in value of the outstanding stock of which is owned, directly or indirectly, by or for the same individual;<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>d.<span style=""> </span><span style=""> </span>A grantor and a fiduciary of any trust; or<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>e.<span style=""> </span><span style=""> </span>The fiduciary of a trust and the fiduciary of another trust if the same person is a grantor with respect to each trust; or<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>f.<span style=""> </span><span style=""> </span>A fiduciary of a trust and a beneficiary of such.<span style=""> </span>[Sec. 36 (B), NIRC of 1997]<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify; text-indent: 0.5in;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><o:p> </o:p></span></p> <p class="MsoNormal" style="text-align: justify; text-indent: 0.5in;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><o:p> </o:p></span></p> <p class="MsoNormal" style="text-align: justify; text-indent: 0.5in;"><b style=""><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">49.<span style=""> </span>May the value of worthless securities be deductible from gross income ?<o:p></o:p></span></b></p> <p class="MsoNormal" style="text-align: justify; text-indent: 0.5in;"><u><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">SUGGESTED ANSWER:</span></u><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>The value of worthless securities are not allowed to be deductible from gross income because they are considered as capital losses and may be deducted only from capital gains.<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><o:p> </o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span><b style="">50.<span style=""> </span>What is the “tax benefit rule” ?<o:p></o:p></b></span></p> <p class="MsoNormal" style="text-align: justify;"><b style=""><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span></span></b><u><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">SUGGESTED ANSWER:</span></u><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>The “tax benefit rule” posits that the recovery of bad debts previously allowed as deduction in the preceding year or years shall be included as part of the taxpayer’s gross income in the year of such recovery to the extent of the income tax benefit of said deduction.<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify; text-indent: 0.5in;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span><o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span><b style="">51.<span style=""> </span>What is depreciation ?<o:p></o:p></b></span></p> <p class="MsoNormal" style="text-align: justify;"><b style=""><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span></span></b><u><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">SUGGESTED ANSWER:</span></u><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>Depreciation is the gradual diminution in the useful value of tangible property resulting from ordinary wear and tear and from normal obsolescence.<span style=""> </span>The term is also applied to amortization of the value of intangible assets the use of which in the trade or business is definitely limited in duration.<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><o:p> </o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span><b style="">52.<span style=""> </span><span style=""> </span>What are the methods of depreciation ?<o:p></o:p></b></span></p> <p class="MsoNormal" style="text-align: justify;"><b style=""><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span></span></b><u><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">SUGGESTED ANSWER:</span></u><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>The methods of depreciation are the following:<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>a.<span style=""> </span><span style=""> </span>Straight line method;<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>b.<span style=""> </span><span style=""> </span>Declining balance method;<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>c.<span style=""> </span><span style=""> </span>Sum of years digits method; and<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>d.<span style=""> </span><span style=""> </span>Any other method prescribed by the Secretary of Finance upon the recommendation of the Commissioner of Internal Revenue: <o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>1)<span style=""> </span><span style=""> </span>Apportionment to units of production;<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>2)<span style=""> </span><span style=""> </span>Hours of productive use;<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>3)<span style=""> </span><span style=""> </span>Revaluation method; and<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>4)<span style=""> </span><span style=""> </span>sinking fund method.<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><b style=""><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span></span></b><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US">:<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span><b style="">53.<span style=""> </span>What are personal and additional exemptions ?<o:p></o:p></b></span></p> <p class="MsoNormal" style="text-align: justify;"><b style=""><i style=""><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span></span></i></b><u><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US">SUGGESTED ANSWER:</span></u><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span>These are the theoretical persona, living and family expenses of an individual allowed to be deducted from the gross or net income of an individual taxpayer.<span style=""> </span><o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span>These are arbitrary amounts which have been calculated by our lawmakers to be roughly equivalent to the minimum of subsistence, taking into account the personal status and additional qualified dependents of the taxpayer.<span style=""> </span>They are fixed amounts in the sense that the amounts have been predetermined by our lawmakers and until our lawmakers make new adjustments on these personal exemptions, the amounts allowed to be deducted by a taxpayer are fixed as predetermined by Congress.<span style=""> </span>[<i style="">Pansacola v. Commissioner of Internal Revenue, </i>G. R. No. 159991, November 16, 2006 citing <i style="">Madrigal and Paterno v. Rafferty and Concepcion, </i>38 Phil. 414, 418 (1918)]<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><o:p> </o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span><b style="">54.<span style=""> </span>What are the personal exemptions allowed for an individual taxpayer ?<o:p></o:p></b></span></p> <p><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;"><span style=""> </span><u>SUGGESTED ANSWER:</u></span><u><span style="font-size: 10.5pt; font-family: Arial;" lang="EN"><o:p></o:p></span></u></p> <p><span style="font-size: 10.5pt; font-family: Arial;" lang="EN">Fifty thousand pesos (P50,000) for each individual taxpayer.<span style=""> </span>[NIRC of 1997, Sec. 55 (A) 1<sup>st</sup> par., as amended by R.A. No. 9504)<o:p></o:p></span></p> <p><span style="font-size: 10.5pt; font-family: Arial;" lang="EN">“In the case of married individuals where only one of the spouse is deriving gross income, only such spouse shall be allowed the personal exemption.<span style=""> </span>[NIRC of 1997, Sec. 55 (A) 2<sup>nd</sup><span style=""> </span>par., as amended by R.A. No. 9504)<o:p></o:p></span></p> <p><span style="font-size: 10.5pt; font-family: Arial;" lang="EN"><o:p> </o:p></span></p> <p><span style="font-size: 10.5pt; font-family: Arial;" lang="EN">“(B) Additional Exemption for Dependents. – There shall be allowed an additional exemption of Twenty-five thousand pesos (P25,000) for each dependent not exceeding four (4).<o:p></o:p></span></p> <p><span style="font-size: 10.5pt; font-family: Arial;" lang="EN">“The additional exemption for dependents shall be claimed by only one of the spouses in the case of married individuals.<o:p></o:p></span></p> <p><span style="font-size: 10.5pt; font-family: Arial;" lang="EN">“In the case of legally separated spouses, additional exemptions may be claimed only by the spouse who has custody of the child or children: Provided, That the total amount of additional exemptions that may be claimed by both shall not exceed the maximum additional exemptions herein allowed. <o:p></o:p></span></p> <p><span style="font-size: 10.5pt; font-family: Arial;" lang="EN">“For purposes of this Subsection, a ‘dependent’ means a legitimate, illegitimate or legally adopted child chiefly dependent upon and living with the taxpayer if such dependent is not more than twenty-one (21) years of age, unmarried and not gainfully employed or if such dependent, regardless of age, is incapable of self-support because of mental or physical defect.<o:p></o:p></span></p> <p><span style="font-size: 10.5pt; font-family: Arial;" lang="EN">“x x x” (Sec. 35, NIRC of 1997, as amended by R.A. No. 9504)<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 11pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><o:p> </o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><u><span style="font-size: 11pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><o:p><span style="text-decoration: none;"> </span></o:p></span></u></p> <p class="MsoNormal" style="text-align: justify;"><u><span style="font-size: 11pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><o:p><span style="text-decoration: none;"> </span></o:p></span></u></p> <p class="MsoNormal" style="text-align: justify;"><b style=""><u><span style="font-size: 12pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US">CAPITAL GAINS TAXATION<o:p></o:p></span></u></b></p> <p class="MsoNormal" style="text-align: justify;"><u><span style="font-size: 11pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><o:p><span style="text-decoration: none;"> </span></o:p></span></u></p> <p class="MsoNormal" style="text-align: justify;"><u><span style="font-size: 11pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><o:p><span style="text-decoration: none;"> </span></o:p></span></u></p> <p class="MsoNormal" style="text-align: justify;"><b style=""><span style="font-size: 11pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span></span></b><b style=""><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US">1.<span style=""> </span><span style=""> </span>What are capital assets ?<span style=""> </span>Explain.<o:p></o:p></span></b></p> <p class="MsoNormal" style="text-align: justify;"><b style=""><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span></span></b><u><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US">SUGGESTED ANSWER:</span></u><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span>Capital assets shall refer to all real properties held by a taxpayer, whether or not connected with his trade or business, and which are not included among the real properties considered as ordinary assets.<span style=""> </span>(Sec. 2.a, Rev. Regs. No. 7-2003)<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span><span style=""> </span>The term “capital assets” means property held by the taxpayer (whether or not connected with his trade or business), BUT DOES NOT INCLUDE:<o:p></o:p></span></p> <p class="MsoNormal" style="margin-left: 0.5in; text-align: justify; text-indent: -0.5in;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span>a.<span style=""> </span><span style=""> </span>Stock in trade of the taxpayer, or<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span><span style=""> </span>b.<span style=""> </span><span style=""> </span>Other<span style=""> </span>property<span style=""> </span>of<span style=""> </span>a kind which would properly be<span style=""> </span>included in the inventory of the taxpayer if on hand at the close of the taxable year, or<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span><span style=""> </span>c.<span style=""> </span><span style=""> </span>Property<span style=""> </span>held<span style=""> </span>by<span style=""> </span>the taxpayer primarily for sale to customers in the ordinary course of his trade or business, or<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span>d.<span style=""> </span><span style=""> </span>Property used in the trade or business, of a character which is subject to the allowance for depreciation; or real property used in the trade or business of the taxpayer. [Sec. 39 (A) (1), NIRC of 1997, capitalized words, numbering and arrangement supplied; Sec. 2.a, Rev. Regs. No. 7-2003]<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><b style=""><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span><span style=""> </span><o:p></o:p></span></b></p> <p class="MsoNormal" style="text-align: justify;"><b style=""><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span>2.<span style=""> </span><span style=""> </span>Give some examples of capital assets<o:p></o:p></span></b></p> <p class="MsoNormal" style="text-align: justify;"><b style=""><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span></span></b><u><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US">SUGGESTED ANSWER:<o:p></o:p></span></u></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span>a.<span style=""> </span><span style=""> </span>Stock and securities held by taxpayers other than dealers in securities;<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span><span style=""> </span>b.<span style=""> </span><span style=""> </span>Jewelry not used for trade and business;<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span><span style=""> </span>c.<span style=""> </span><span style=""> </span>Residential houses and lands owned and used as such;<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span><span style=""> </span>d.<span style=""> </span><span style=""> </span>Automobiles not used in trade and business;<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span>e.<span style=""> </span><span style=""> </span>Paintings, sculptures, stamp collections, objects of arts which are not used in trade or business;<span style=""> </span><o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span>f.<span style=""> </span><span style=""> </span>Inherited large tracts of agricultural land which were subdivided pursuant to the government mandate under land reform, then sold to tenants.<span style=""> </span><i style="">(Roxas v. Court of Tax Appeals, etc. L-25043, </i></span><st1:date month="4" day="26" year="1968"><i style=""><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US">April 26, 1968</span></i></st1:date><i style=""><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US">)</span></i><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span>g.<span style=""> </span><span style=""> </span>“Real property used by an exempt corporation in its exempt operations, such as a corporation included in the enumeration of Section 30 of the Code, shall not be considered used for business purposes, and therefore considered as capital asset.”<span style=""> </span>(last sentence, 3<sup>rd</sup> par., Sec. 3.b, Rev. Regs. No. 7-2003)<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span>h.<span style=""> </span><span style=""> </span>“Real property, whether single detached, townhouse, or condominium unit, not used in trade or business as evidenced by a certification from the Barangay Chairman or from the head of administration, in case of condominium unit, townhouse or apartment, and as validated from the existing available records of the Bureau of Internal Revenue, owned by an individual engaged in business, shall be treated as capital asset.”<span style=""> </span>(last par., Sec. 3.b., Rev. Regs. No. 7-2003)<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><o:p> </o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span></span><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span><b style="">3. What are considered as ordinary assets ?<o:p></o:p></b></span></p> <p class="MsoNormal" style="text-align: justify;"><b style=""><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span></span></b><u><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">SUGGESTED ANSWER:</span></u><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>Ordinary assets shall refer to all real properties specifically excluded from the definition of capital assets, namely:<span style=""> </span><o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>a.<span style=""> </span><span style=""> </span>Stock in trade of a taxpayer or other real property of a kind which would properly be included in the inventory of a taxpayer if on hand at the close of the taxable year; or<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span><span style=""> </span>b.<span style=""> </span><span style=""> </span>Real property<span style=""> </span>held<span style=""> </span>by<span style=""> </span>the taxpayer primarily for sale to customers in the ordinary course of his trade or business; or<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span><span style=""> </span>c.<span style=""> </span><span style=""> </span>Real property used in trade or business (i.e. buildings and/or improvements), of a character which is subject to the allowance for depreciation; or<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>d.<span style=""> </span><span style=""> </span>Real property used in<span style=""> </span>trade or business of the taxpayer. (Sec. 2. b, Rev. Regs. No. 7-2003)<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><o:p> </o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span><b style=""><span style=""> </span>4.</b>.<span style=""> </span><b style="">Give some examples of ordinary assets hence not capital assets.<o:p></o:p></b></span></p> <p class="MsoNormal" style="text-align: justify;"><b style=""><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span></span></b><u><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US">SUGGESTED ANSWER:<o:p></o:p></span></u></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span>a.<span style=""> </span><span style=""> </span>The machinery and equipment of a manufacturing concern subject to depreciation;<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span><span style=""> </span>b.<span style=""> </span><span style=""> </span>The tractors, trailers and trucks of a hauling company;<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span>c.<span style=""> </span><span style=""> </span>The condominium building owned by a<span style=""> </span>realty company the units of which are for rent or for sale;<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span>d.<span style=""> </span><span style=""> </span>The wood, paint, varnish, nails, glue, etc. which are the raw materials of a furniture factory;<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span>e.<span style=""> </span><span style=""> </span>Inherited parcels of land of substantial areas located in the heart of Metro Manila, which were subdivided into smaller lots then sold on installment basis after introducing comparatively valuable<span style=""> </span>improvements not for the purpose of simply liquidating the estate but to make them more saleable ; the employment of an attorney-in-fact for the purpose of developing, managing, administering and selling the lots; sales made with frequency and continuity; annual sales income from the sales was considerable; and the heir was not a stranger to the real estate business.<span style=""> </span><i style="">(Tuazon, Jr.<span style=""> </span>v. Lingad, 58 SCRA 170)<o:p></o:p></i></span></p> <p class="MsoNormal" style="text-align: justify; text-indent: 0.5in;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US">f.<span style=""> </span>Inherited agricultural property improved by introduction of good roads, concrete gutters, drainage and lighting systems converts the property to an ordinary asset.<span style=""> </span>The property forms part of the stock in trade of the owner, hence an ordinary asset.<span style=""> </span>This is so, as the owner is now engaged in the business of subdividing real estate. (<i style="">Calasanz v. Commissioner of Internal Revenue, </i>144 SCRA<span style=""> </span>at p. 672)<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span><span style=""> </span>g.<span style=""> </span><span style=""> </span>Real properties acquired by banks through foreclosure sales are considered their ordinary assets.<span style=""> </span>However, banks shall not be considered as habitually engaged in the real estate business for purposes of determining the applicable rate of withholding tax.<span style=""> </span>(Sec. 2. b, Rev. Regs. No. 7-2003)<o:p></o:p></span></p> <p class="MsoBodyTextIndent" style="margin-left: 0in; text-indent: 0in;"><span style="font-size: 10.5pt; font-family: Arial; font-weight: normal;" lang="EN-US"><span style=""> </span><span style=""> </span>“A property purchased for future use in the business, even though this purpose is later thwarted by circumstances beyond the taxpayer’s control, does not lose its character as an ordinary asset.<span style=""> </span>Nor does a mere discontinuance of the active use of the property change its character previously established as a business property.”<span style=""> </span>(last sentence, Sec. 3.a.4, Rev. Regs. No. 7-2003)</span><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"> <o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify; text-indent: 0.5in;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><o:p> </o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><o:p> </o:p></span></p> <p class="MsoNormal" style="text-align: justify; text-indent: 0.5in;"><b style=""><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">5.<span style=""> </span></span></b><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">Factors<span style=""> </span>considered<span style=""> </span>as<span style=""> </span>helpful<span style=""> </span>guides in determining whether asset is ordinary or capital:<u><o:p></o:p></u></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span><span style=""> </span>a.<span style=""> </span>The purpose for which the property was initially acquired;<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span><span style=""> </span>b.<span style=""> </span>The purpose for which the property was subsequently held;<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span><span style=""> </span>c.<span style=""> </span>The extent to which the improvements, if any, were made by the taxpayer;<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span><span style=""> </span>d.<span style=""> </span>The frequency, number and continuity of sales;<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span><span style=""> </span><span style=""> </span>e.<span style=""> </span>The<span style=""> </span>extent<span style=""> </span>and<span style=""> </span>nature<span style=""> </span>of<span style=""> </span>the<span style=""> </span>transactions<span style=""> </span>involved;<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span><span style=""> </span>f.<span style=""> </span>The ordinary business of the taxpayer;<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span><span style=""> </span>g.<span style=""> </span>The<span style=""> </span>extent<span style=""> </span>of<span style=""> </span>advertising,<span style=""> </span>promotion, or other activities used in soliciting buyers for the sale of the property;<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span><span style=""> </span><span style=""> </span>h.<span style=""> </span>The listing of property, with brokers; and<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span><span style=""> </span><span style=""> </span>i.<span style=""> </span>The purpose for which the property was held at the time of sale.<span style=""> </span>[<i style="">Elumba, et al. v. The Honorable Commissioner of Internal Revenue, CTA Case No. 5103,<span style=""> </span>August 16, 1996; Klarkowski, TCM 1965-328, affirmed 385 F. 2d (CA-7, 1967</i>)]<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><i style=""><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span></span></i><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span><span style=""> </span>j.<span style=""> </span>“Real properties acquired by banks through foreclosure sales are considered as their ordinary assets.<span style=""> </span>However, banks shall not be considered as habitually engaged in the real estate business for purposes of determining the application rate of withholding tax imposed” under Revenue Regulations.<span style=""> </span>(last par., Sec. 2.b, Rev. Regs. No. 7-2003)<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><o:p> </o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><b style=""><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>6.<span style=""> </span>What is the tax treatment of real properties that have been transferred ? <o:p></o:p></span></b></p> <p class="MsoNormal" style="text-align: justify;"><b style=""><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span></span></b><u><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">SUGGESTED ANSSWER:</span></u><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>Real properties classified as capital or ordinary asset in the hands of the seller/transferor may change their character in the hands of the buyer/transferee.<span style=""> </span>The classification of such property in the hands of the buyer/transferee shall be determined in accordance with the following rules:<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify; text-indent: 0.5in;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">a.<span style=""> </span><span style=""> </span>Real property transferred through succession or donation to the heir or donee who is not engaged in the real estate business with respect to the real property inherited or donated, and who does not subsequently use such property in trade or business, shall be considered as a capital asset in the hands of the heir or donee.<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify; text-indent: 0.5in;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">b.<span style=""> </span><span style=""> </span>Real property received as dividend by stockholders who are not engaged in the real estate business and who not subsequently use such real property in trade or business shall be treated as capital assets in the hands of the recipient even if the corporation which declared the real property dividend is engaged in real estate business.<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify; text-indent: 0.5in;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">c.<span style=""> </span><span style=""> </span>The real property received in an exchange shall be treated as ordinary asset in the hands of the transferee in the case of a tax-free exchange by taxpayer not engaged in real estate business to a taxpayer who is engaged in real estate business, or to a taxpayer who, even if not engaged in real estate business, will use in business the property received in the exchange.<span style=""> </span>(Sec. 3.f., Rev. Regs. No. 7-2003)<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><b style=""><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><o:p> </o:p></span></b></p> <p class="MsoNormal" style="text-align: justify; text-indent: 0.5in;"><b style=""><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">7.<span style=""> </span></span></b><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">“Monetary consideration or the presence or absence of profit in the operation of the property is not significant in the characterization of the property.<span style=""> </span>So long as the property is or has been used for business purposes, whether for the benefit of the owner or nay of its members or stockholders, it shall be considered as an ordinary asset.”<span style=""> </span>(1<sup>st</sup> and 2<sup>nd</sup> sentences, 3<sup>rd</sup> par., Sec. 3.b., Rev. Regs. No. 7-2003)<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify; text-indent: 0.5in;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><o:p> </o:p></span></p> <p class="MsoNormal" style="text-align: justify; text-indent: 0.5in;"><b style=""><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">8.<span style=""> </span></span></b><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">Taxpayers engaged in the real estate business<b style=""> </b>shall refer collectively to real estate dealers, real estate developers, and/or real estate lessors. (Sec. 2.g, Rev. Regs. No. 7-2003)<i style=""><o:p></o:p></i></span></p> <p class="MsoNormal" style="text-align: justify; text-indent: 0.5in;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><o:p> </o:p></span></p> <p class="MsoNormal" style="text-align: justify; text-indent: 0.5in;"><b style=""><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">9.<span style=""> </span></span></b><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">The term taxpayers not engaged in the real estate business<b style=""> </b>shall refer to persons other than real estate dealers, real estate developers and/or real estate lessors.<span style=""> </span>A taxpayer<b style=""> </b>whose primary purpose of engaging in business, or whose Articles of Incorporation states that its primary purpose is to engage in the real estate business shall be deemed to been engaged in the real estate business.<span style=""> </span>(Sec. 2.g, Rev. Regs. No. 7-2003)<i style=""><o:p></o:p></i></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span><span style=""> </span><o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify; text-indent: 0.5in;"><b style=""><i style=""><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><o:p> </o:p></span></i></b></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span><b style="">10.<span style=""> </span>The tax is “imposed upon capital gains presumed to have been realized from the sale, exchange, or other disposition of real property located in the Philippines, classified as capital assets.”</b><span style=""> </span>[Sec. 24 (D) (1`), NIRC of 1997]<span style=""> </span>Revenue Regulations No. 7-2003 has defined real property as having “the same meaning attributed to that term under Article 415 of Republic Act No. 386, otherwise known as the ‘<i style="">Civil Code of the Philippines.’<span style=""> </span></i>(Sec. 2.c, Rev. Regs. No. 7-2003)<span style=""> </span><o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><u><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><o:p><span style="text-decoration: none;"> </span></o:p></span></u></p> <p class="MsoNormal" style="text-align: justify;"><b style=""><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span>11.<span style=""> </span>What transactions are covered by the presumed capital gains tax on real property ?<o:p></o:p></span></b></p> <p class="MsoNormal" style="text-align: justify;"><b style=""><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span></span></b><u><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US">SUGGESTED ANSWER:<o:p></o:p></span></u></p> <p class="MsoNormal" style="text-align: justify;"><b style=""><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span></span></b><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span>a.<span style=""> </span><span style=""> </span>sale,<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span><span style=""> </span>b. <span style=""> </span>exchange,<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span><span style=""> </span>c. <span style=""> </span>or other disposition, including <i style="">pacto de retro</i> sales and other forms<span style=""> </span>of<span style=""> </span>conditional<span style=""> </span>sales.<span style=""> </span>[Sec. 24<span style=""> </span>(D) (1), NIRC of 1997, numbering and arrangement supplied]<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span>d.<i style=""> </i>“<span style=""> </span>Sale, exchange, or other disposition” includes taking by the government through condemnation proceedings. <i style="">(Gutierrez v. Court of Tax Appeals, et al., </i>101 Phil. 713<i style="">; Gonzales v. Court of Tax Appeals, et al., </i>121 Phil. 861)<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><o:p> </o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span><b style="">12.<span style=""> </span>A final withholding tax (FWT) of 20% on passive income is collected from the interest income of banks.<span style=""> </span>It likewise has to pay a 5% gross receipts tax (GRT) on gross receipts which includes their passive income.<span style=""> </span>XYZ Bank now claims that the GRT should be computed after deducting the 20% passive income tax on the ground that the monies or receipts that do not redound to the benefit of the taxpayer are not part of its gross receipts.<span style=""> </span>To impose the GRT without deducting the 20% would be double taxation.<span style=""> </span>It also contends that since the 20% was withheld at source and is paid directly to the government, then the bank has not received the same.<span style=""> </span>Thus, it should not be included in the gross receipts subject to tax.<o:p></o:p></b></span></p> <p class="MsoNormal" style="text-align: justify;"><b style=""><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span>Resolve the issue of whether the 20% FWT on the bank’s passive income form part of the taxable gross receipts for the purpose of computing the 5% GRT. <o:p></o:p></span></b></p> <p class="MsoNormal" style="text-align: justify;"><b style=""><i style=""><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span></span></i></b><u><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US">SUGGESTED ANSWER:</span></u><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"> No.<span style=""> </span>The word “gross” must be used in its plain and ordinary meaning.<span style=""> </span>It is defined as “whole, entire, total, without deduction.”<span style=""> </span>Thus, the 20% should not be deducted for purposes of computing the 5% gross receipts tax.<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span>Receipt may either be actual or constructive.<span style=""> </span>There is prior to the withholding a constructive receipt of the interest, otherwise there would be no interest from where the 20% tax may be withheld from.<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span>There<span style=""> </span>is no double taxation because there are two kinds of taxes, the 20% FWT which is an income tax and the 5% GRT which is a percentage tax. (<i style="">Commissioner of Internal Revenue v. Citytrust Investment Phils., Inc., </i>G. R. No. 139786, September 27, 2006 and companion case)<o:p></o:p></span></p> <p class="MsoNormal" style="margin-left: 0.4in; text-align: justify; text-indent: -0.4in;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span><o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span><b style="">13.<span style=""> </span>MBC was incorporated in 1961 and engaged in commercial banking operations since 1987.<span style=""> </span>On May 22, 1987, it ceased operations that year by reason of insolvency and its assets and liabilities were placed under the charge of a government-appointed receiver.<span style=""> </span>On June 23, 1999, the BSP authorized MBC to operate as a thrift bank.<o:p></o:p></b></span></p> <p class="MsoNormal" style="text-align: justify;"><b style=""><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span>In 2000, It filed its tax return for the year 1999 paying the amount of P33 million computed in accordance with the minimum corporate income tax (MCIT).<span style=""> </span>It sought the BIR’s ruling on whether it is entitled to the four (4) year grace period for paying on the basis of MCIT reckoned from 1999.<span style=""> </span>BIR then ruled that cessation of business activities as a result of being placed under involuntary receivership may be an economic reason for suspending the imposition of the MCIT.<o:p></o:p></span></b></p> <p class="MsoNormal" style="text-align: justify;"><b style=""><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span>As a result of the ruling MBC filed an application for refund of the P33 million.<span style=""> </span>Due to the BIR’s inaction, MBC filed a petition for review with the CTA.<o:p></o:p></span></b></p> <p class="MsoNormal" style="text-align: justify;"><b style=""><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span>The CTA denied the petition on the ground that MBC is not a newly organized corporation.<span style=""> </span>In a volte facie the BIR now maintains that MBC should pay the MCIT beginning January 1, 1998 as it did not close its business operations in 1987 but merely suspended the same.<span style=""> </span>Even if placed under receivership, the corporate existence was never affected.<span style=""> </span>Thus, it falls under the category of an existing corporation recommencing its banking operations.<o:p></o:p></span></b></p> <p class="MsoNormal" style="text-align: justify;"><b style=""><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span>Should the refund be granted ?<o:p></o:p></span></b></p> <p class="MsoNormal" style="text-align: justify;"><b style=""><i style=""><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span></span></i></b><u><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US">SUGGESTED ANSWER:</span></u><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span>Yes.<span style=""> </span>The MCIT shall be imposed beginning in the fourth taxable year immediately following the year in which the corporation commenced its business operations.<span style=""> </span>[Sec. 27 (E) (1), NIRC of 1997]<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span>The date of commencement of operations of a thrift bank is the date it was registered with the SEC or the date when the Certificate of Authority to Operate was issued to it by the Monetary Board, whichever comes later.<span style=""> </span>(Sec. 6, Rev. Regs. No. 4-95)<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span>Clearly then. MBC is entitled to the grace period of four years from June 23, 1999 when it was authorized by the BSP to operate as a thrift bank before the MCIT should be applied to it.<span style=""> </span>(<i style="">Manila Banking Corporation v. Commissioner of Internal Revenue, </i>G. R. No. 168118, August 26, 2006)<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span></span><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span><b style=""><span style=""> </span><o:p></o:p></b></span></p> <p class="MsoNormal" style="text-align: justify;"><b style=""><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>14.<span style=""> </span></span></b><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">In case the mortgagor exercises his right of redemption within one (1) year from the issuance of the certificate of sale, in a foreclosure of mortgage sale of real property, no capital gains tax shall be imposed because no capital gains has been derived by the mortgagor and no sale or transfer of real property was realized. [Sec. 3 (1), Rev. Regs. No. 4-99]<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><o:p> </o:p></span></p> <p class="MsoNormal" style="text-align: justify; text-indent: 0.5in;"><b style=""><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">15.<span style=""> </span></span></b><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">In case of non-redemption of the property sold upon a foreclosure of mortgage sale, the presumed capital gains tax shall be imposed, based on the bid price of the highest bidder but only upon the expiration of the one year period of redemption provided for under Sec. 6 of Act No. 3135, as amended by Act No. 4118, and shall be paid within thirty (30) days from the expiration of the said one-year redemption period.<span style=""> </span>[Sec. 3 (2), Rev. Regs. No. 4-99]<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify; text-indent: 0.5in;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span><span style=""> </span><o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify; text-indent: 0.5in;"><b style=""><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">16.<span style=""> </span></span></b><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">Real properties acquired by banks through foreclosure sales are considered as their ordinary assets.<span style=""> </span>However, banks shall not be considered as habitually engaged in the real estate business for purposes of determining the application rate of withholding tax imposed” under Revenue Regulations.<span style=""> </span>(last par., Sec. 2.b, Rev. Regs. No. 7-2003)<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><o:p> </o:p></span></p> <p class="MsoNormal" style="text-align: justify; text-indent: 0.5in;"><b style=""><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">17.<span style=""> </span></span></b><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">The basis for the final presumed capital gains tax of six per cent (6%) is whichever is the higher of the<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><b style=""><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span><span style=""> </span></span></b><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">a.<span style=""> </span>gross selling price, or<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span><span style=""> </span>b.<span style=""> </span>the current fair market value as determined below:<o:p></o:p></span></p> <p class="MsoNormal" style="margin-left: 0.5in; text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>1)<span style=""> </span>the fair market value or real properties located in each zone or area as determined by the Commissioner of Internal Revenue after consultation with competent appraisers both from the private and public sectors; or<o:p></o:p></span></p> <p class="MsoNormal" style="margin-left: 0.5in; text-align: justify; text-indent: 0.5in;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">2)<span style=""> </span>the fair market value as shown in the schedule of values of the Provincial and City Assessors.<span style=""> </span>[Sec. 24 (D) (1) in relation to Sec. 6 (E), both of the NIRC of 1997]<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span><u><o:p></o:p></u></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span><b style="">18.<span style=""> </span></b>Holding period not applied to the taxation of the presumed capital gains derived from the sale of real property considered as capital assets.<span style=""> </span><o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><b style=""><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><o:p> </o:p></span></b></p> <p class="MsoNormal" style="text-align: justify;"><b style=""><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>19.<span style=""> </span></span></b><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">The tax liability, of individual taxpayers (not corporate), if any, on gains from sales or other dispositions of real property, classified as capital assets, to the government or any of its political subdivisions or agencies or to government owned or controlled corporations shall be determined, at the option of the taxpayer, by including the proceeds as part of gross income to be subjected to the allowable deductions and/or personal and additional exemptions, then to the schedular tax [Sec. 24 (D) (1), in relation to Sec. 24 (A) (1), both of the NIRC of 1997] or the final presumed capital gains tax of six percent (6%). [Sec. 24<span style=""> </span>(D)<span style=""> </span>(1) in relation to Sec. 6 (E), both of the NIRC of 1997]<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span><o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span><b style="">20.<span style=""> </span></b>The interest at the legal rate on the value of expropriated land should be taxed as ordinary income, and not as capital gains.<span style=""> </span><i style="">(Gonzales v. Court of Tax Appeals, et al., 121 Phil. 861)<o:p></o:p></i></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><o:p> </o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><b style=""><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>21.<span style=""> </span></span></b><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">The seller of the real property, classified as a capital asset, pays the presumed capital gains tax whether:<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span><span style=""> </span>a.<span style=""> </span>an individual [Sec. 24 (D) (1), NIRC of 1997];<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span><span style=""> </span><span style=""> </span>1)<span style=""> </span>Citizen, whether resident or not [<i style="">Ibid.</i>];<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span><span style=""> </span>2)<span style=""> </span>Resident alien [<i style="">Ibid.</i>];<o:p></o:p></span></p> <p class="MsoNormal" style="margin-left: 0.5in; text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>3)<span style=""> </span>Nonresident alien engaged in trade or business in the Philippines [Sec. 25 (A) (3) in relation to Sec. 24 (D) (1), both of the NIRC of 1997];<o:p></o:p></span></p> <p class="MsoNormal" style="margin-left: 0.5in; text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>4)<span style=""> </span>Nonresident alien not engaged in trade or business in the Philippines [Sec. 25 (B) in relation to Sec. 24 (D) (1), both of the NIRC of 1997];<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span><span style=""> </span>b.<span style=""> </span>an estate or trust (<i style="">Ibid.</i>);<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span><span style=""> </span>c.<span style=""> </span>a domestic corporation. [Sec. 27 (D) (5), NIRC of 1997]<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span><span style=""> </span><span style=""> </span><o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span><b style="">22.<span style=""> </span></b>The proceeds of<span style=""> </span>sale of real property, classified as capital assets, by foreign corporations shall be subject to ordinary income taxation of whichever is higher between the reduced rate of 32% and the minimum corporate income tax [Sec. 28 (A) (1) (2) in relation to Sec. 27 (E), both of the NIRC of 1997]<o:p></o:p></span></p> <p class="MsoNormal" style="margin-left: 0.5in; text-align: justify;"><b style=""><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span></span></b><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span><span style=""> </span><b style="">23.<span style=""> </span></b>In the instances where non-resident aliens are qualified to own real property in the Philippines (like condominium units, or buildings, or other immovables as defined under Art. 415 of Rep. Act No. 386, the Civil Code of the Philippines), and these are considered as capital in character, they are to be subject to tax in the same manner<span style=""> </span>as citizens and resident aliens.<span style=""> </span>[Sec. 25 (A) (3) and Sec. 25 (B) in relation to Sec. 24 (D), all of the NIRC of 1997] <o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><o:p> </o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span><b style="">24.<span style=""> </span>Excepted from the payment of the presumed capital gains tax are those presumed to have been realized from the disposition by natural persons of their principal place of residence<o:p></o:p></b></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>a.<span style=""> </span>the proceeds of which is fully utilized in acquiring or constructing a new principal residence;<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>b.<span style=""> </span><span style=""> </span>within eighteen (18) calendar months from the date of sale or disposition<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>c.<span style=""> </span><span style=""> </span>the BIR Commissioner shall have been duly notified by the taxpayer within thirty (30) days from the date of sale or disposition through a prescribed return of his intention to avail of the tax exemption; and<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>d. <span style=""> </span>the said tax exemption can only be availed of once every ten (10) years.<span style=""> </span>[Sec. 24 (D) (2), NIRC of 1997]<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><o:p> </o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span><b style="">25. <span style=""> </span>Net loss carry-over means the deduction from net capital gains of a succeeding year the net capital loss suffered during the prior year. </b><span style=""> </span>Net operating loss carry-over is the deduction from gross income for the next three (3) consecutive taxable years following the year of such loss, the excess of allowable deduction over the gross income. (Sec. 39 [D], NIRC of 1997)<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><o:p> </o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span><b>26.</b><b style=""><span style=""> </span>Distinctions between net loss carry-over and net operating loss carry-over.</b> <u><span style=""> </span><o:p></o:p></u></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>a.<span style=""> </span><u>Source</u>:<span style=""> </span>The source of net loss carry-over are capital losses only WHILE the source of net operating loss carry-over are from the ordinary trade and business of the taxpayer.<span style=""> </span><o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>b.<span style=""> </span><u>Who may</u> <u>enjoy the carry-over</u>:<span style=""> </span>Only taxpayers other than corporations may enjoy net loss carry-over WHILE only corporations may enjoy the net operating loss carry-over.<span style=""> </span>(Sec. 39 [D], NIRC of 1997)<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><o:p> </o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span><b style="">27.<span style=""> </span>Concept of net loss carry-over.<span style=""> </span></b>Any taxpayer, other than a corporation (individuals including trusts and estates), who sustains in any taxable year a net capital loss from capital transactions involving capital assets (other than real property or shares of stock not listed or traded in the stock exchange), is allowed to treat during the succeeding year such net capital loss as a loss from the sale or exchange of a capital asset (other than real property or shares of stock not listed and traded in the stock exchange), held for<span style=""> </span>more than twelve months.<span style=""> </span>(Sec. 39 [D], NIRC of 1997)<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span><o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span><span style=""> </span><b style="">28.<span style=""> </span>The equity investment by a bank in another corporation is capital in character,</b> the loss of which could be deductible only from capital gains, and not from any other income of the taxpayer.<span style=""> </span><i style="">(China Banking Corporation v. Court of Appeals, et al., G.R. No. 12508, </i>July 19, 2000)<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span><o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><b style=""><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>29.<span style=""> </span>A capital gain or a capital loss normally requires the concurrence of two conditions</span></b><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"> for it to result:<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>a.<span style=""> </span><span style=""> </span>There is a sale or exchange; and<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>b.<span style=""> </span><span style=""> </span>The thing sold or exchanged is a capital asset.<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>When securities become worthless there is strictly no sale or exchange but the law deems the loss anyway to be “a loss from the sale or exchange of capital assets. <i style="">(China Banking Corporation v. Court of Appeals, et al</i>., G.R. No. 12508, July 19, 2000)<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify; text-indent: 0.5in;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><o:p> </o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span><b style="">30.<span style=""> </span></b>Securities, defined for deductibility of bad debts are shares of stock in a corporation and rights to subscribe for or to receive such shares.<span style=""> </span>The term includes bonds, debentures, notes or certificates, or other evidence of indebtedness, issued by any corporation, including those issued by a government or political subdivision thereof, with interest coupons or in registered form.<span style=""> </span>(Sec. 2.b, Rev. Regs. No. 5-99)<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><o:p> </o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span><span style=""> </span><b style="">31. <span style=""> </span></b>General rule:<span style=""> </span>If securities, held as capital asset, are ascertained to be worthless and charged off within the taxable year, the loss resulting therefrom shall be considered as a loss from the sale or exchange of capital asset made on the last day of such taxable year.<span style=""> </span>The taxpayer, however, has to prove through clear and convincing evidence that the securities are in fact worthless. (Sec. 5, Rev. Regs. No. 5-99)<span style=""> </span><b style=""><span style=""> </span><o:p></o:p></b></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><o:p> </o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span><b style="">32.<span style=""> </span></b>The above rule, however, is not true in the case of banks or trust companies incorporated under the laws of the Philippines, a substantial part of whose business is the receipt of deposits.<span style=""> </span>(Sec. 5, Rev. Regs. No. 5-99)<span style=""> </span><b style=""><span style=""> </span><o:p></o:p></b></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><o:p> </o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span><b style=""><i style="">Is a mutual life insurance company which is considered as a cooperative required to register with the Cooperatives Development Authority (CDA) before it could avail of the exemptions from the payment of percentage taxes under Sec. 121 and documentary stamps on policies of insurance or annuities under Sec. 199 both of the BIRC ?<o:p></o:p></i></b></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>ANSWER:<span style=""> </span>No.<span style=""> </span>The Tax Code does not require a mutual life insurance company to register with the CDA in order to enjoy the exemption.<span style=""> </span>Only cooperatives to be formed or organized under the Cooperative Code require registration with the CDA and a mutual life insurance company is not one of them.<span style=""> </span>Finally, not even the Insurance Code requires registration with the CDA.<span style=""> </span>(<i style="">Republic , etc. v. Sunlife Assurance Company of Canada, </i>G. R. No. 158085, October 14, 2005)<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><o:p> </o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><o:p> </o:p></span></p> <p><span style="font-size: 10.5pt; font-family: Arial;" lang="EN">“Sec. 24. Income Tax Rates. – <o:p></o:p></span></p> <p><span style="font-size: 10.5pt; font-family: Arial;" lang="EN">“(A)” Rates of Income Tax on Individual Citizen and Individual Resident Alien of the Philippines. – <o:p></o:p></span></p> <p><span style="font-size: 10.5pt; font-family: Arial;" lang="EN">“(1) x x x<o:p></o:p></span></p> <p><span style="font-size: 10.5pt; font-family: Arial;" lang="EN">“x x x; and<o:p></o:p></span></p> <p><span style="font-size: 10.5pt; font-family: Arial;" lang="EN">“(c) On the taxable income defined in Section 31 of this Code, other than income subject to tax under Subsections (B), (C) and (D) of this Section, derived for each taxable year from all sources within the Philippines by an individual alien who is a resident of the Philippines.<o:p></o:p></span></p> <p><span style="font-size: 10.5pt; font-family: Arial;" lang="EN">“(2) Rates of Tax on Taxable Income of Individuals. – The tax shall be computed in accordance with and at the rates established in the following schedule:<o:p></o:p></span></p> <p><span style="font-size: 10.5pt; font-family: Arial;" lang="EN">“Not over P10,000 ………………………………………. 5%<o:p></o:p></span></p> <p><span style="font-size: 10.5pt; font-family: Arial;" lang="EN">“Over P10,000 but not over P30,000 ……………… P500 + 10% of excess over P10,000<o:p></o:p></span></p> <p><span style="font-size: 10.5pt; font-family: Arial;" lang="EN">“Over P30,000 but not over P70,000 ……………… P2,500 + 15% of the excess over P30,000<o:p></o:p></span></p> <p><span style="font-size: 10.5pt; font-family: Arial;" lang="EN">“Over P70,000 but not over P140,000 ……………. P8,500 + 20% of the excess over P70,000<o:p></o:p></span></p> <p><span style="font-size: 10.5pt; font-family: Arial;" lang="EN">“Over P140,000 but not over P250,000 ………….. P22,500 + 25% of the excess over P140,000<o:p></o:p></span></p> <p><span style="font-size: 10.5pt; font-family: Arial;" lang="EN">“Over P250,000 but not over P500,000 ………….. P50,000 + 30% of the excess over P250,000<o:p></o:p></span></p> <p><span style="font-size: 10.5pt; font-family: Arial;" lang="EN">“Over P500,000 ………………………………………….. P125,000 + 32% of the excess over P500,000<o:p></o:p></span></p> <p><span style="font-size: 10.5pt; font-family: Arial;" lang="EN">“For married individuals, the husband and wife, subject to the provision of Section 51(D) hereof, shall compute separately their individual income tax based on their respective total taxable income: Provided, That if any income cannot be definitely attributed to or identified as income exclusively earned or realized by either of the spouses, the same shall be divided equally between the spouses for the purpose of determining their respective taxable income.<o:p></o:p></span></p> <p><span style="font-size: 10.5pt; font-family: Arial;" lang="EN">“Provided, That minimum wage earners as defined in Section 22(HH) of this Code shall be exempt from the payment of income tax on their taxable income: Provided, further, That the holiday pay, overtime pay, night shift differential pay and hazard pay received by such minimum wage earners shall likewise be exempt from income tax.<o:p></o:p></span></p> <p><span style="font-size: 10.5pt; font-family: Arial;" lang="EN">“x x x.” [Sec. 24, NIRC of 1997 as amended by R.A. No. 9504)<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><o:p> </o:p></span></p> <p><span style="font-size: 10.5pt; font-family: Arial;" lang="EN">GG)” The term ‘statutory minimum wage’ shall refer to the rate fixed by the Regional Tripartite Wage and Productivity Board, as defined by the Bureau of Labor and Employment Statistics (BLES) of the Department of Labor and Employment (DOLE). [Sec. 22 (GG), NIRC of 1997 as added by R.A. No. 9504]<o:p></o:p></span></p> <p><span style="font-size: 10.5pt; font-family: Arial;" lang="EN">“(HH)” The term ‘minimum wage earner’ shall refer to a worker in the private sector paid the statutory minimum wage, or to an employee in the public sector with compensation income of not more than the statutory minimum wage in the non-agricultural sector where he/she is assigned.”<span style=""> </span>[Sec. 22 (HH), NIRC of 1997, as added by R.A. No. 9504]<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><o:p> </o:p></span></p> <p class="MsoNormal" style="text-align: center;" align="center"><b style=""><span style="font-size: 12pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US">TRANSFER TAXES<o:p></o:p></span></b></p> <p class="MsoNormal" style="text-align: justify;"><i style=""><span style="font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><o:p> </o:p></span></i></p> <p class="MsoNormal" style="text-align: justify;"><b style=""><u><span style="font-size: 12pt; font-family: Arial;" lang="EN-US">ESTATE TAXES<o:p></o:p></span></u></b></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><o:p> </o:p></span></p> <p class="MsoNormal" style="text-align: justify; text-indent: 0.5in;"><b style=""><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">1. </span></b><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">The gross estate for purposes of estate taxation of Filipino citizens, whether residents or nonresidents and resident alien includes the value at the time of his death of all his real property, wherever situated, personal property, whether tangible, intangible or mixed, wherever situated, to the extent of the interest existing therein of the decedent at the time of his death.<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify; text-indent: 0.5in;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><o:p> </o:p></span></p> <p class="MsoNormal" style="text-align: justify; text-indent: 0.5in;"><b style=""><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">2. </span></b><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">The gross estate for purposes of estate taxation of non-resident aliens includes the value at the time of his death of all the real property situated in the Philippines, personal property whether tangible, intangible or mixed, situated in the Philippines, to the extent of the interest therein of the decedent at the time of his death.<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><o:p> </o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span><b style="">3</b>.<span style=""> </span>Items deductible from the gross estate of a resident or nonresident Filipino decedent or resident alien decedent:<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><b style=""><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span></span></b><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">a.<span style=""> </span>Expenses, losses, claims, indebtedness and taxes;<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>b.<span style=""> </span>Property previously taxed;<span style=""> </span><o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>c.<span style=""> </span>Transfers for public use;<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>d.<span style=""> </span>The Family Home up to a value not exceeding P1 million;<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>e.<span style=""> </span>Standard deduction of P1 million;<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>f.<span style=""> </span>Medical expenses not exceeding P500,000.00;<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify; text-indent: 0.5in;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">g.<span style=""> </span>Amount of exempt retirement received by the heirs under Rep. Act </span><st1:state><st1:place><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">Mo.</span></st1:place></st1:state><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"> 4917;<o:p></o:p></span></p> <p class="MsoNormal" style="margin-left: 0.5in; text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">h.<span style=""> </span>Net share of the surviving spouse in the conjugal partnership.<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><o:p> </o:p></span></p> <p class="MsoNormal" style="text-align: justify; text-indent: 0.5in;"><b style=""><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">4.<span style=""> </span></span></b><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">The notarial fee paid for the extrajudicial settlement is clearly a deductible expense since such settlement effected a distribution of the estate to his lawful heirs,<span style=""> </span>Similarly, the attorney’s fees for a guardian of the property during the decedent’s lifetime should also be considered as a deductible administration expense.<span style=""> </span>The guardian gives a detailed accounting of decedent’s property and gives advice as to the proper settlement of the estate, acts which contributed towards the collection of decedent’s assets and the subsequent settlement of the case.<span style=""> </span><i style="">(Commissioner of Internal Revenue v. Court of Appeals, et al., G.R. No. 123206, </i></span><st1:date month="3" day="22" year="2000"><i style=""><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">March 22, 2000</span></i></st1:date><i style=""><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">)<o:p></o:p></span></i></p> <p class="MsoNormal" style="text-align: justify; text-indent: 0.5in;"><i style=""><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><o:p> </o:p></span></i></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span><b style="">5.<span style=""> </span></b>Judicial expenses are expenses of administration.<span style=""> </span>Administration expenses, as an allowable deduction from gross estate of the decedent for purposes of arriving at the value of the net estate, have been construed to include all expenses “essential to the collection of the assets, payment of debts or the distribution of the property to the persons entitled to it.”<span style=""> </span>In other words, the expenses must be essential to the proper settlement of the estate.<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><o:p> </o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span><b style="">6.<span style=""> </span></b>Not deductible are expenditures incurred for the individual benefit of the heirs, devisees or legatees.<span style=""> </span>Thus, in Lorenzo v. </span><st1:city><st1:place><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">Posadas</span></st1:place></st1:city><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">, the Court construed the phrase “judicial expenses of the testamentary or intestate proceedings” as not including the compensation paid to a trustee of the decedent’s estate when it appeared that such trustee was appointed for the purpose of managing the decedent’s real property for the benefit of the testamentary heir.<span style=""> </span>In another case, the Court disallowed the premiums paid on the bond filed by the administrator as an expense of administration since the giving of a bond is in the nature of a qualification for the office, and not necessary in the settlement of the estate.<span style=""> </span>Neither may attorney’s fees incident to litigation incurred by the heirs in asserting their respective rights be claimed as a deduction from the gross estate. <i style="">(Commissioner of Internal Revenue v. Court of Appeals, et al., G.R. No. 123206,<span style=""> </span></i></span><st1:date month="3" day="22" year="2000"><i style=""><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">March 22, 2000</span></i></st1:date><i style=""><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">)<o:p></o:p></span></i></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><o:p> </o:p></span></p> <p class="MsoNormal" style="text-align: justify; text-indent: 0.5in;"><b style=""><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">7.<span style=""> </span></span></b><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">Not every inter-vivos transfer in anticipation of death is considered “transfer in contemplation of death” for purposes of determining the property to be included in the gross estate of a decedent.<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify; text-indent: 0.5in;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><o:p> </o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span><span style=""> </span><b style="">8.<span style=""> </span></b>To be considered a “transfer in contemplation of death” “the decedent has at any time made a transfer, by trust or otherwise, in contemplation of or intended to take effect in possession or enjoyment at or after death”<span style=""> </span>[Sec. 85 (B), NIRC of 1997].<span style=""> </span>It is clear that the properties are not transferred in contemplation of or intended to take effect in possession or enjoyment at or after death.<span style=""> </span><o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><o:p> </o:p></span></p> <p class="MsoNormal" style="text-align: justify; text-indent: 0.5in;"><b style=""><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">9.<span style=""> </span></span></b><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">There is no transfer in contemplation of death if there is no showing<span style=""> </span>the transferor<span style=""> </span>“retained for his life or for any period which does not in fact end before his death:<span style=""> </span>(1)<span style=""> </span>the possession or enjoyment of, or the right to the income from the property, or (2)<span style=""> </span>the right, either alone or in conjunction with any person, to designate the person who shall possess or enjoy the property or the income therefrom.”<span style=""> </span>[Sec. 85 (B), NIRC of 1997]<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><o:p> </o:p></span></p> <p class="MsoNormal" style="text-align: justify; text-indent: 0.5in;"><b style=""><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">10. </span></b><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">The approval of the court sitting in probate, or as a settlement tribunal over the estate of the deceased is not a mandatory requirement for the collection of the estate.<span style=""> </span>The probate court is determining issues which are not against the property of the decedent, or a claim against the estate as such, but is against the interest or property right which the heir, legatee, devisee, etc. has in the property formerly held by the decedent.<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>The notices of levy were regularly issued within the prescriptive period.<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>The tax assessment having become final, executory and enforceable, the same can no longer be contested by means of a disguised protest.<span style=""> </span><i style="">(Marcos, II v. Court of Appeals, et al.,<span style=""> </span>273 SCRA 47)<o:p></o:p></i></span></p> <p class="MsoNormal" style="text-align: justify;"><b style=""><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><o:p> </o:p></span></b></p> <p class="MsoNormal" style="text-align: justify;"><b style=""><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span>11. <span style=""> </span>The approval of the court sitting in probate, or as a settlement tribunal over the estate of the deceased is not a mandatory requirement for the collection of the estate.</span></b><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span>The probate court is determining issues which are not against the property of the decedent, or a claim against the estate as such, but is against the interest or property right which the heir, legatee, devisee, etc. has in the property formerly held by the decedent.<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span>The notices of levy were regularly issued within the prescriptive period.<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span>The tax assessment having become final, executory and enforceable, the same can no longer be contested by means of a disguised protest.<span style=""> </span><i style="">(Marcos, II v. Court of Appeals, et al</i>.,<span style=""> </span>273 SCRA 47)<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><o:p> </o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><b style=""><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span>12.<span style=""> </span>Jose died and his estate taxes were correspondingly paid as shown by a Tax Clearance issued by the BIR </span></b><b style=""><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">to the effect that the taxes due on the transfer of real and personal properties of Jose had been fully paid and said properties may be transferred to his heirs.<span style="letter-spacing: -0.1pt;"><o:p></o:p></span></span></b></p> <p class="MsoNormal" style="text-align: justify;"><b style=""><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span>Subsequently the BIR issued an assessment notice on the ground that there were improper deductions as the claims against the estate were subsequently compromised.<o:p></o:p></span></b></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><o:p> </o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><b style=""><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">As a result, the specific question is whether the actual claims of the aforementioned creditors may be fully allowed as deductions from the gross estate of Jose despite the fact that the said claims were reduced or condoned through compromise agreements entered into by the Estate with its creditors.<span style=""> </span><o:p></o:p></span></b></p> <p class="MsoNormal" style="text-align: justify;"><b style=""><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>In short, is the estate still liable for deficiency estate taxes ?<o:p></o:p></span></b></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>SUGGESTED ANSWER:<span style=""> </span>No.<span style=""> </span>The estate is not liable for deficiency estate taxes.<span style=""> </span>The claims existing at the time of death are significant to, and should be made the basis of, the determination of allowable deductions.<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>Reasons:<span style=""> </span><i>First</i>.<span style=""> </span>There is no law, nor may there be discerned any legislative intent in our tax laws, which disregards the date-of-death valuation principle and particularly provides that post-death developments must be considered in determining the net value of the estate. It bears emphasis that tax burdens are not to be imposed, nor presumed to be imposed, beyond what the statute expressly and clearly imports, tax statutes being construed <i>strictissimi juris</i> against the government. Any doubt on whether a person, article or activity is taxable is generally resolved against taxation. <o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span><i>Second</i>. Such construction finds relevance and consistency in our Rules on Special Proceedings wherein the term "claims" required to be presented against a decedent's estate is generally construed to mean debts or demands of a pecuniary nature which could have been enforced against the deceased in his lifetime, or liability contracted by the deceased before his death<i>. </i>(<i style="">Dizon, etc., v. Court of Tax Appeals, et al., </i>G.R. No. 140944, April 30, 2008)<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><o:p> </o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><b style=""><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span>13. <span style=""> </span>The approval of the court sitting in probate, or as a settlement tribunal over the estate of the deceased is not a mandatory requirement for the collection of the estate.</span></b><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span>The probate court is determining issues which are not against the property of the decedent, or a claim against the estate as such, but is against the interest or property right which the heir, legatee, devisee, etc. has in the property formerly held by the decedent.<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span>The notices of levy were regularly issued within the prescriptive period.<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span>The tax assessment having become final, executory and enforceable, the same can no longer be contested by means of a disguised protest.<span style=""> </span><i style="">(Marcos, II v. Court of Appeals, et al</i>.,<span style=""> </span>273 SCRA 47)<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><o:p> </o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><b style=""><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span>14.<span style=""> </span>Jose died and his estate taxes were correspondingly paid as shown by a Tax Clearance issued by the BIR </span></b><b style=""><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">to the effect that the taxes due on the transfer of real and personal properties of Jose had been fully paid and said properties may be transferred to his heirs.<span style="letter-spacing: -0.1pt;"><o:p></o:p></span></span></b></p> <p class="MsoNormal" style="text-align: justify;"><b style=""><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span>Subsequently the BIR issued an assessment notice on the ground that there were improper deductions as the claims against the estate were subsequently compromised.<o:p></o:p></span></b></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><o:p> </o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><b style=""><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">As a result, the specific question is whether the actual claims of the aforementioned creditors may be fully allowed as deductions from the gross estate of Jose despite the fact that the said claims were reduced or condoned through compromise agreements entered into by the Estate with its creditors.<span style=""> </span><o:p></o:p></span></b></p> <p class="MsoNormal" style="text-align: justify;"><b style=""><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>In short, is the estate still liable for deficiency estate taxes ?<o:p></o:p></span></b></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>SUGGESTED ANSWER:<span style=""> </span>No.<span style=""> </span>The estate is not liable for deficiency estate taxes.<span style=""> </span>The claims existing at the time of death are significant to, and should be made the basis of, the determination of allowable deductions.<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>Reasons:<span style=""> </span><i>First</i>.<span style=""> </span>There is no law, nor may there be discerned any legislative intent in our tax laws, which disregards the date-of-death valuation principle and particularly provides that post-death developments must be considered in determining the net value of the estate. It bears emphasis that tax burdens are not to be imposed, nor presumed to be imposed, beyond what the statute expressly and clearly imports, tax statutes being construed <i>strictissimi juris</i> against the government. Any doubt on whether a person, article or activity is taxable is generally resolved against taxation. <o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span><i>Second</i>. Such construction finds relevance and consistency in our Rules on Special Proceedings wherein the term "claims" required to be presented against a decedent's estate is generally construed to mean debts or demands of a pecuniary nature which could have been enforced against the deceased in his lifetime, or liability contracted by the deceased before his death<i>. </i>(<i style="">Dizon, etc., v. Court of Tax Appeals, et al., </i>G.R. No. 140944, April 30, 2008)<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: center;" align="center"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><o:p> </o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><o:p> </o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span><b style=""><span style=""> </span>15,<span style=""> </span></b>When the donee or beneficiary is a stranger, the tax payable by the donor shall be 30% of the net gifts.<span style=""> </span><o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><b style=""><i style=""><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><o:p> </o:p></span></i></b></p> <p class="MsoNormal" style="text-align: justify;"><b style=""><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>16.<span style=""> </span></span></b><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">For purposes of the donor’s tax, a stranger is person who is not a:<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>“(1)<span style=""> </span>Brother, sister (whether by whole or half-blood), spouse, ancestor and lineal descendant; or<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>(2)<span style=""> </span>Relative by consanguinity in the collateral line within the fourth degree of relationship.”<span style=""> </span>[Sec. 99 (B), NIRC of 1997]<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><o:p> </o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><b style=""><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>17.<span style=""> </span></span></b><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">The amount of P100,000.00 donated during a calendar year is exempt from donor’s tax. [Sec. 99 (A), NIRC of 1997]<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><o:p> </o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span><b style="">18.<span style=""> </span></b>The donation of a prize to an athlete in an international sports tournament held abroad and sanctioned by the national sports association is exempt from donor’s tax.<span style=""> </span>(Sec. 1, Rep. Act No. 7549)<span style=""> </span><o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><o:p> </o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span><b style="">19.<span style=""> </span></b>A non-resident citizen or alien is exempt only from the payment of donor’s taxes if his gifts are made to<span style=""> </span>or for the use of the National Government or any entity created by any of its agencies which is not conducted for profit, or to any political subdivision of the said Government.<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><o:p> </o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span><b style="">20.<span style=""> </span></b>A non-resident cirtizen or alien is subject to donor’s tax where the gift is not made in favor of an educational and/or charitable, religious, cultural or social welfare corporation, institution, foundation, trust or philanthropic organization or research institution or corporation which does not use more than 30% of the donation for administration purposes.<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><o:p> </o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><o:p> </o:p></span></p> <p class="MsoNormal" style="text-align: center;" align="center"><b style=""><span style="font-size: 12pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US">VALUE-ADDED TAX<o:p></o:p></span></b></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><o:p> </o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span></span><b style=""><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">1.<span style=""> </span><span style=""> </span>Define value-added tax.<span style=""> </span><o:p></o:p></span></b></p> <p class="MsoNormal" style="text-align: justify;"><b style=""><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span></span></b><u><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">SUGGESTED ANSWER:</span></u><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>A tax which is imposed only on the increase in the worth, merit or importance of goods, properties or services, and not on the total value of the goods or services being sold or rendered.<u><span style="letter-spacing: -0.1pt;"> </span></u><b style=""><o:p></o:p></b></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><o:p> </o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span></span><b style=""><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">2.<span style=""> </span><span style=""> </span>Discuss<span style=""> </span>the<span style=""> </span>meaning<span style=""> </span>and scope of value-added tax (VAT).</span></b><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><b style=""><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span></span></b><u><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">SUGGESTED ANSWER:</span></u><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>The value added tax is a tax levied on a wide range of goods and services.<span style=""> </span>It is a tax on the value, added by every seller, with aggregate annual sales of articles and / or services, exceeding P1,500,000.00, to his purchase of goods reported and services unless exempt.<span style=""> </span>VAT is computed at the rate of 0% or 12% of the gross selling price of goods or gross receipts realized from the sale of services.<span style=""> </span>(<i style="">Kapatiran ng mga Naglilingkod sa Pamahalaan ng Pilipinas, Inc., et al., v. Tan, etc</i>. and companion cases, 163 SCRA 371, amount and rates supplied)<o:p></o:p></span></p> <p class="MsoNormal" style="margin-left: -0.25in; text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><o:p> </o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span><b style="">3.<span style=""> </span>Purposes or objectives of VAT.<span style=""> </span></b>The VAT system of taxation is <o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>a.<span style=""> </span>principally aimed at realizing the system of taxing goods and services, <o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>b.<span style=""> </span>simplifying tax administration, and <o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>c.<span style=""> </span>make the tax system more equitable, to enable the country to attain economic recovery.<span style=""> </span>(<i style="">Kapatiran ng mga Naglilingkod sa Pamahalaan ng Pilipinas, Inc., et al., v. Tan, etc. and companion cases,</i> 163 SCRA 371)<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify; text-indent: 0.5in;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><o:p> </o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><b style=""><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>4.<span style=""> </span>What are the characteristics of the Value-Added Tax ?<span style=""> </span><span style=""> </span><o:p></o:p></span></b></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span><u>SUGGESTED ANSWER:<o:p></o:p></u></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>a.<span style=""> </span>The value- added tax is an indirect tax and the amount of tax may be shifted or passed on to the buyer, transferee or lessee of the goods, properties or services. (NIRC of 1997, Sec. 105, 2<sup>nd</sup> sentence)<u><o:p></o:p></u></span></p> <p class="MsoNormal" style="text-align: justify; text-indent: 0.5in;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">The seller is the one statutorily liable for the payment of the tax but the amount of the tax may be shifted or passed on to the buyer transferee or lessee of the goods, properties or service.<span style=""> </span>The rule shall likewise apply to existing contracts of sale or lease of goods, properties or services at the time of the effectivity of RA No. 9337.<span style=""> </span>However, in the case of importation, the importer is the one liable for the VAT.<span style=""> </span>(Rev. Regs. No. 16-2005, Sec. 4.105-2, 2<sup>nd</sup>, 3<sup>rd</sup> and last sentences.) <o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify; text-indent: 0.5in;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">b.<span style=""> </span>VAT is a tax on consumption levied on the sale, barter, exchange or lease of goods or properties and services in the Philippines and on importation of goods into the Philippines.<span style=""> </span>However, in the case of importation, the importer is the one liable for the VAT.<span style=""> </span>(Rev. Regs. No. 16-2005, Sec. 4.105-2, 1<sup>st</sup> sentence) <o:p></o:p></span></p> <p class="MsoNormal" style="margin-right: 1.45pt; text-align: justify; text-indent: 38.15pt;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span></span><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><o:p></o:p></span></p> <p class="MsoNormal" style="margin-right: 1.45pt; text-align: justify; text-indent: 38.15pt;"><b style=""><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">5.<span style=""> </span><span style=""> </span>The VAT is a tax on consumption.<span style=""> </span>Explain the meaning of consumption as used under the VAT system.<span style=""> </span>Give an example.<o:p></o:p></span></b></p> <p class="MsoNormal" style="margin-right: 1.45pt; text-align: justify; text-indent: 38.15pt;"><u><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">SUGGESTED ANSWER:</span></u><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>Consumption is "the use of a thing in a way that thereby exhausts it." <o:p></o:p></span></p> <p class="MsoNormal" style="margin-right: 1.45pt; text-align: justify; text-indent: 38.15pt;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">Applied to services, the term means the performance or "successful completion of a contractual duty, usually resulting in the performer's release from any past or future liability x x x"<span style=""> </span>Unlike goods, services cannot be physically used in or bound for a specific place when their destination is determined. Instead, there can only be a "predetermined end of a course" when determining the service "location or position x x x for legal purposes." <o:p></o:p></span></p> <p class="MsoNormal" style="margin-right: 1.45pt; text-align: justify; text-indent: 38.15pt;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">For example the services rendered by a local firm to its foreign client are performed or successfully completed upon its sending to a foreign client the drafts and bills it has gathered from service establishments here. Its services, having been performed in the Philippines, are therefore also consumed in the Philippines.<span style=""> </span>Such facilitation service has no physical existence, yet takes place upon rendition, and therefore upon consumption, in the Philippines.<span style=""> </span>[<i style="">Commissioner of Internal Revenue v. American Express</i><span style=""> </span></span><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">G.R. No. 152609, 29 June 2005, 462 SCRA 197</span><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"> cited in <i style="">Commissioner of Internal Revenue v. Placer Dome Technical Services (Phils.), Inc. </i>G. R. No. 164365, June 8, 2007</span><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">]</span><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify; text-indent: 0.5in;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><o:p> </o:p></span></p> <p class="MsoNormal" style="text-align: justify; text-indent: 0.5in;"><b style=""><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">6.<span style=""> </span><span style=""> </span>Who are liable for the value-added tax ?<span style=""> </span></span></b><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify; text-indent: 0.5in;"><u><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">SUGGESTED ANSWER:</span></u><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span><o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify; text-indent: 0.5in;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">a.<span style=""> </span>Any person who, in the course of his trade or business,<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span><span style=""> </span><span style=""> </span>1)<span style=""> </span>Sells,<span style=""> </span>barters,<span style=""> </span>exchanges or leases goods <span style=""> </span>or properties, or<o:p></o:p></span></p> <p class="MsoNormal" style="margin-left: 0.5in; text-align: justify; text-indent: -0.5in;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span><span style=""> </span>2)<span style=""> </span>renders services, and <o:p></o:p></span></p> <p class="MsoNormal" style="margin-left: 0.5in; text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">b.<span style=""> </span><span style=""> </span>any<span style=""> </span>person<span style=""> </span>who<span style=""> </span>imports<span style=""> </span>goods xxx<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>However, in the case of importation of taxable goods, the importer, whether an individual or corporation and whether or not made in the course of his trade or business, shall be liable to VAT xxx.<span style=""> </span>(Rev. Regs. No. 16-2005,Sec. 4.105-1, paraphrasing supplied)<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><o:p> </o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><b style=""><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span></span></b><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span><b style="">7.<span style=""> </span>Indirect tax, defined.<span style=""> </span></b>An indirect tax “is imposed upon goods [before] reaching the consumer who ultimately pays for it, not as a tax, but as a part of the purchase price.”<span style=""> </span>(<i style="">Commissioner, of Internal Revenue v. American Express International, Inc. (Philippine Branch), </i>G. R. No. 152609, June 29, 2005<i style=""> </i>citing various cases and authorities)<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><o:p> </o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span><b style="">8.<span style=""> </span>VAT is an indirect tax.<span style=""> </span></b>The VAT being an indirect tax on expenditure, the seller of goods or services may pass on the amount of tax paid to the buyer, with the seller acting merely as a tax collector.<span style=""> </span>The burden of VAT is intended to fall on the immediate buyers and ultimately, the end-consumers.<span style=""> </span>(<i style="">Abakada Guro Party List (etc.) v. Ermita, etc., et al., </i>G. R. No. 168056, September 1, 2005 and companion cases)<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><b style=""><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span></span></b><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">NOTE:<span style=""> </span>VAT is an indirect tax that may be shifted or passed on to the buyer, transferee or lessee of the goods, properties or services.<span style=""> </span>As such, it should be understood not in the context of the person or entity that is primarily, directly liable for its payment, but in terms of its nature as a tax on consumption.<span style=""> </span>[<i style="">Commissioner of Internal Revenue v. Seagate Technology (Philippines), </i>G. R. No. 153866, February 11, 2005 citing various authorities}<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>As an indirect tax on services, the VAT’s main object is the transaction itself or, more concretely, the performance of all kinds of services conducted in the course of trade or business in the Philippines.<span style=""> </span>These services must be regularly conducted in this country, undertaken in “pursuit of a commercial or an economic activity,” for a valuable consideration, and not exempt under the Tax Code, other special laws, or any international agreement.<span style=""> </span>(<i style="">Commissioner, supra </i>citing various cases and authorities)<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><o:p> </o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span><b style="">9.<span style=""> </span>What is the effect of VAT being an indirect tax on exemptions ?<span style=""> </span></b>If a special law merely exempts a party as a seller from its direct liability for payment of the VAT, but does not relieve the same party as a purchaser from its indirect burden of the VAT shifted to it by its VAT-registered suppliers, the purchase transaction is not exempt.<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>REASON:<span style=""> </span>The VAT is a tax on consumption, the amount of which may be shifted or passed on by the seller to the purchaser of the goods, properties or services.<span style=""> </span>[<i style="">Commissioner of Internal Revenue v. Seagate Technology (Philippines), </i>G. R. No. 153866, February 11, 2005)<span style=""> </span><o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>Illustration:<span style=""> </span>A VAT exempt seller sells to a non-VAT exempt purchaser.<span style=""> </span>The purchaser is subject to VAT because the VAT is merely added as part of the purchase price and not as a tax because the burden is merely shifted.<span style=""> </span>The seller is still exempt because it could pass on the burden of paying the tax to the purchaser.<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><o:p> </o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span><b style="">10.<span style=""> </span>Service performed by American Express in facilitating the collection of receivables from credit card members situated in the Philippines and payment to service establishments in the Philippines in behalf of its Hong-Kong based client is subject to VAT.<span style=""> </span></b>This is so because it meets all the requirements for VAT imposition, as follows:<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>a.<span style=""> </span>It regularly renders in the Philippines the service of facilitating the collection and payment of receivables belonging to a foreign company that is a clearly separate and distinct entity.<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>b.<span style=""> </span>Such service is commercial in nature; carried on over a sustained period of time; on a significant scale with a reasonable degree of frequency; and not at random, fortuitous, or attenuated.<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>c.<span style=""> </span>For this service, it definitely receives consideration in foreign currency that is accounted for in conformity with law.<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>d.<span style=""> </span>It is not an entity exempt under any of our laws or international agreements.<span style=""> </span>(<i style="">Commissioner, of Internal Revenue v. American Express International, Inc. (Philipppine Branch), </i>G. R. No. 152609, June 29, 2005)<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><o:p> </o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span><b style="">11.<span style=""> </span>While the service performed by American Express is subject to VAT it is zero-rated, and BIR Revenue Regulations that alter the legal requirements for zero-rating are <i style="">ultra vires </i>and invalid.<span style=""> </span></b>The VAT system uses the destination principle which posits that the goods and services are taxed only in the country where they are consumed,<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>However, the law itself provides for clear exceptions under which the supply of services shall be zero-rated, among which are the following:<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>a.<span style=""> </span>The service is performed in the Philippines;<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>b.<span style=""> </span>The services are within the categories provided for under the Tax Code; and<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>c.<span style=""> </span>It is paid for in acceptable foreign currency of the Bangko Sentral ng Pilipinas.<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>American Express renders assistance to its foreign clients by receiving the bills of service establishments located in the country and forwarding them to their clients abroad.<span style=""> </span>The services are performed or successfully completed upon send to its foreign clients the drafts and bills it has gathered from service establishments here,<span style=""> </span>Its services, having been performed in the Philippines are therefore also consumed in the Philippines.<span style=""> </span>Thus, its services are exempt from the destination principle and are zero-rated.<span style=""> </span><o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>The BIR could not change the law.<span style=""> </span>(<i style="">Commissioner, of Internal Revenue v. American Express International, Inc. (Philipppine Branch), </i>G. R. No. 152609, June 29, 2005)<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><o:p> </o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span><b style="">12.<span style=""> </span>Concept of VAT zero-rating.<span style=""> </span></b>The tax rate is set at zero.<span style=""> </span>When applied to the tax base, such rate obviously results in no tax chargeable against the purchaser.<span style=""> </span>The seller of such transactions charges no output tax, but can claim a refund or a tax credit certificate for the VAT previously charged by suppliers. [<i style="">Commissioner of Internal Revenue v. Seagate Technology (Philippines), </i>G. R. No. 153866, February 11, 2005]<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><b style=""><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span></span></b><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">Under a zero-rating scheme, the sale or exchange of a particular service is completely freed from the VAT, because the seller is entitled to recover, by way of a refund or as an input tax credit, the tax that is included in the cost of purchases attributable to the sale or exchange.<span style=""> </span>The tax paid or withheld is not deducted from the tax base.<span style=""> </span>(<i style="">Commissioner, of Internal Revenue v. American Express International, Inc. (Philippine Branch), </i>G. R. No. 152609, June 29, 2005 citing various cases)<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><o:p> </o:p></span></p> <p class="MsoNormal" style="text-align: justify; text-indent: 0.4in;"><b style=""><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">13.<span style=""> </span>Situs of taxation of zero-rated VAT services such as facilitating the collection of receivables from credit card members situated in the Philippines and payment to service establishments in the Philippines.<span style=""> </span></span></b><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">The place where the service is rendered determines the jurisdiction (<i style="">Commissioner of Internal Revenue v. American Express International, Inc. (Philipppine Branch), </i>G. R. No. 152609, June 29, 2005 citing “[N]o state may tax anything not within its jurisdiction without violating the due process clause of the [C]constitution.” <i style="">Manila Gas Corp. v. Collector of Internal Revenue, </i>62 Phil. 895, 900, January 17, 1936, per Malcolm, J.) to impose the VAT [<i style="">Commissioner, supra</i> citing Deoferio, Jr. and Mamalateo, <i style="">The Value Added Tax in the Philippines </i>(2000), p. 93]<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>Performed in the Philippines, the service is necessarily subject to its jurisdiction [<i style="">Commissioner, supra </i>citing Alejandro, <i style="">The Law on Taxation </i>(1966 rev. ed.) p. 33], for the State necessarily has to have a “substantial connection”<span style=""> </span>[<i style="">Commissioner, supra </i>citing Garner (ed. in chief), <i style="">Black’s Law Dictionary </i>(8<sup>th</sup> ed., 1999), p. 1503] to it in order to enforce a zero rate.<span style=""> </span>[<i style="">Commissioner, supra </i>citing De Leon, <i style="">The Fundamentals of Taxation </i>(12<sup>th</sup> ed., 1998), p. 3]<span style=""> </span>The place of payment is immaterial [<i style="">Commissioner, supra</i> citing Deoferio, Jr. and Mamalateo, <i style="">The Value Added Tax in the Philippines </i>(2000), p. 93], much less is the place where the output of the service will be further or ultimately used.<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>This is so because the law neither makes a qualification nor adds a condition in determining the tax situs of a zero-rated service.<span style=""> </span>(<i style="">Commissioner, supra</i>)<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><o:p> </o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span><b style="">14.<span style=""> </span>Various VAT methods and systems.<o:p></o:p></b></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>a.<span style=""> </span><b style="">Cost deduction method.<span style=""> </span></b>This is a single-stage tax which is payable only by the original sellers.<span style=""> </span>[<i style="">Abakada Guro Party List (etc.) v. Ermita, etc., et al., </i>G. R. No. 168056, September 1, 2005 and companion cases citing Deoferio, Jr. V. A. and Mamalateo, V.C., <i style="">The Value Added Tax in the Philippines </i>(First Edition 2000)]<span style=""> </span>This was subsequently modified and a mixture of “cost deduction method” and “tax credit method” was used to determine the value-added tax payable.<span style=""> </span>(<i style="">Ibid.</i>)<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>b.<span style=""> </span><b style="">Tax credit method.</b><span style=""> </span>This method relies on invoices, an entity can credit against or subtract from<span style=""> </span>the VAT charged on its sales or outputs the VAT paid on its purchases, inputs and imports.<span style=""> </span>[<i style="">Commissioner of Internal Revenue v. Seagate Technology (Philippines), </i>G. R. No. 153866, February 11, 2005 citing various cases and authorities; <i style="">Abakada Guro Party List (etc.) v. Ermita, etc., et al., </i>G. R. No. 168056, September 1, 2005 and companion cases)<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>If at the end of a taxable period, the output taxes charged by a seller are equal to the input taxes passed on by the suppliers, no payment is required.<span style=""> </span>It is when the output taxes exceed the input taxes that the excess has to be paid.<span style=""> </span>If however, the input taxes exceed the output taxes, the excess shall be carried over to the succeeding quarter or quarters.<span style=""> </span>Should the input taxes result from zero-rated or effectively zero-rated transactions or from acquisition of capital goods, any excess over the output taxes shall instead be refunded to the taxpayer or credited against other internal revenue taxes.<span style=""> </span>[<i style="">Commissioner of Internal Revenue v. Seagate Technology (Philippines), </i>G. R. No. 153866, February 11, 2005 citing various cases and authorities]<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><o:p> </o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span><b style="">15.<span style=""> </span>The VAT registration fee imposed on non-VAT enterprises</b> which includes among others, religious sects which sells and distributes religious literature is not violative of religious freedom,<b style=""><i style=""> </i></b>although a fixed amount <b style="">is not imposed for the exercise of a privilege but only for the purpose of defraying part of the cost of registration.</b><o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>The registration fee is thus more of an administrative fee, one not imposed on the exercise of a privilege, much less a constitutional right.<span style=""> </span><i style="">(Tolentino v. Secretary of Finance, et al., and companion cases, </i>235 SCRA 630)<o:p></o:p></span></p> <p class="MsoNormal" style="margin-right: 1.45pt; text-align: justify; text-indent: 38.15pt;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><o:p> </o:p></span></p> <p style="text-align: justify;"><b style=""><span style="font-size: 10.5pt; font-family: Arial;"><span style=""> </span>16.<span style=""> </span>Interpretation of the term “In the Course of Trade or Business.<span style=""> </span></span></b><span style="font-size: 10.5pt; font-family: Arial;">VAT is not a singular-minded tax on every transactional level. Its assessment bears direct relevance to the taxpayer’s role or link in the production chain. Hence, as affirmed by Section 99 of the Tax Code and its subsequent incarnations,<span style=""> </span>the tax is levied only on the sale, barter or exchange of goods or services by persons who engage in such activities, <b>in the course of trade or business</b>. These transactions outside the course of trade or business may invariably contribute to the production chain, but they do so only as a matter of accident or incident. As the sales of goods or services do not occur within the course of trade or business, the providers of such goods or services would hardly, if at all, have the opportunity to appropriately credit any VAT liability as against their own accumulated VAT collections since the accumulation of output VAT arises in the first place only through the ordinary course of trade or business.<span style=""> </span>(<i style="">Commissioner of Internal Revenue v. Magsaysay Lines, Inc., et al., </i>G. R. No. 146984, July 28, 2006)<b style=""> <o:p></o:p></b></span></p> <p style="text-align: justify;"><b style=""><span style="font-size: 10.5pt; font-family: Arial;"><span style=""> </span>17.<span style=""> </span>Sale of vessels not in the ordinary course of business of NDC. <a name="top"><span style=""> </span></a></span></b><span style=""><span style="font-size: 10.5pt; font-family: Arial;">Pursuant to a government program of privatization, NDC, a VAT-registered entity created for the purpose of selling real property, decided to sell to private enterprise all of its shares in its wholly-owned subsidiary the National Marine Corporation (NMC). The NDC decided to sell in one lot its NMC shares and five (5) of its ships, which are 3,700 DWT Tween-Decker, "Kloeckner" type vessels.</span></span><span style="font-size: 10.5pt; font-family: Arial;"> The vessels were constructed for the NDC between 1981 and 1984, then initially leased to Luzon Stevedoring Company, also its wholly-owned subsidiary. Subsequently, the vessels were transferred and leased, on a bareboat basis, to the NMC.<span style="color: navy;"> <span style=""> </span></span>The NMC shares and the vessels were offered for public bidding. Among the stipulated terms and conditions for the public auction was that the winning bidder was to pay "a value added tax of 10% on the value of the vessels."<span style=""> </span>Magsaysay Lines, Inc., offered to buy the shares and the vessels for <s>P</s>168,000,000.00. The bid was made by Magsaysay Lines, purportedly for a new company still to be formed composed of itself, Baliwag Navigation, Inc., and FIM Limited of the Marden Group based in Hongkong . The bid was approved by the Committee on Privatization, and a Notice of Award was issued to Magsaysay Lines.<span style=""> </span><span style=""> </span>Is the sale subject to VAT ?<span style=""> </span><span style=""> </span>SUGGESTED ANSWER:<span style=""> </span>No.<span style=""> </span>The sale is not subject to VAT.<span style=""> </span>In <span style="">Imperial v. Collector of Internal Revenue</span>, G.R. No. L-7924, September 30, 1955 (97 Phil. 992), the term "carrying on business" does not mean the performance of a single disconnected act, but means conducting, prosecuting and continuing business by performing progressively all the acts normally incident thereof; while "<b>doing business</b>" conveys the idea of business being done, not from time to time, but all the time. [J. Aranas, UPDATED NATIONAL INTERNAL REVENUE CODE (WITH ANNOTATIONS), p. 608-9 (1988)]. "<b>Course of business</b>" is what is usually done in the management of trade or business. [<b>Idmi v. Weeks & Russel</b>, 99 So. 761, 764, 135 Miss. 65, cited in Words & Phrases, Vol. 10, (1984)].<b style=""><span style=""> </span><span style=""> </span></b>What is clear therefore, based on the aforecited jurisprudence, is that "course of business" or "doing business" connotes regularity of activity. In the instant case, the sale was an isolated transaction. The sale which was involuntary and made pursuant to the declared policy of Government for privatization could no longer be repeated or carried on with regularity. It should be emphasized that the normal VAT-registered activity of NDC is leasing personal property.<span style=""> </span><b style=""><span style=""> </span></b>This finding is confirmed by the Revised Charter of the NDC which bears no indication that the NDC was created for the primary purpose of selling real property.<b style=""> </b>(<i style="">Commissioner of Internal Revenue v. Magsaysay Lines, Inc., et al., </i>G. R. No. 146984, July 28, 2006)<b style=""> <o:p></o:p></b></span></p> <p style="text-align: justify;"><b style=""><span style="font-size: 10.5pt; font-family: Arial;"><span style=""> </span>18.<span style=""> </span>Under the Value Added Tax (VAT), the tax is imposed on sales, barter, or exchange or goods and services.<span style=""> </span>The VAT is also imposed on certain transactions “deemed sales.”<span style=""> </span>What are these so-called transactions “deemed sales “ ? </span></b><span style="font-size: 10.5pt; font-family: Arial;"><span style=""> </span><u>SUGGESTED ANSWER:</u><span style=""> </span><span style=""> </span>a.<span style=""> </span>Transfer,<span style=""> </span>use<span style=""> </span>or<span style=""> </span>consumption<span style=""> </span>not in the course of business or properties originally intended for sale or for use in the course of business.<span style=""> </span>xxx<u><o:p></o:p></u></span></p> <p class="MsoNormal" style="margin-left: 0.5in; text-align: justify; text-indent: -0.5in;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>b.<span style=""> </span>Distribution or transfer to:<o:p></o:p></span></p> <p class="MsoNormal" style="margin-left: 0.5in; text-align: justify; text-indent: -0.5in;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>1)<span style=""> </span>Shareholders or investors as share in the profits of the VAT- registered person; xxx or<o:p></o:p></span></p> <p class="MsoNormal" style="margin-left: 0.5in; text-align: justify; text-indent: -0.5in;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>2)<span style=""> </span>Creditors in payment of debt or obligation<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>c.<span style=""> </span>Consignment<span style=""> </span>of<span style=""> </span>goods<span style=""> </span>if actual sale is not made within sixty (60) days following the date such goods were consigned.<span style=""> </span>Consigned goods returned by the consignee within the 60-day period are not deemed sold.<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>d.<span style=""> </span>Retirement<span style=""> </span>from<span style=""> </span>or<span style=""> </span>cessation<span style=""> </span>of<span style=""> </span>business, with respect to all goods on hand, <o:p></o:p></span></p> <p class="MsoNormal" style="margin-left: 0.5in; text-align: justify; text-indent: -0.5in;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>1)<span style=""> </span>whether capital goods, stock-in-trade, supplies or materials as of the date of such retirement, or cessation, <o:p></o:p></span></p> <p class="MsoNormal" style="margin-left: 0.5in; text-align: justify; text-indent: -0.5in;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>2)<span style=""> </span>whether or not the business is continued by the new owner or successor.<span style=""> </span>xxx<span style=""> </span>[Rev. Regs. No. 16-2005, Sec. 4.106-7, paraphrasing, arrangement and numbering supplied]<o:p></o:p></span></p> <p class="MsoNormal" style="margin-left: 0.25in; text-align: justify; text-indent: -0.25in;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><o:p> </o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><b style=""><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>19.<span style=""> </span>What transactions considered retirement or cessation of business “deemed sale” subject to VAT ?<o:p></o:p></span></b></p> <p class="MsoNormal" style="text-align: justify; text-indent: 0.5in;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">a.<span style=""> </span>Change of ownership of the business.<span style=""> </span>There is change in the ownership of the business where a single proprietorship incorporates; or <o:p></o:p></span></p> <p class="MsoNormal" style="margin-left: 0.5in; text-align: justify; text-indent: 0.5in;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">1)<span style=""> </span>the proprietor of a single proprietorship sells his entire business.<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>b.<span style=""> </span>Dissolution of a partnership and creation of a new partnership which takes over the business.<span style=""> </span>[Rev. Regs. No. 16-2005, Sec. 4.106-7 (a), (4) paraphrasing, arrangement and numbering supplied]<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><o:p> </o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><b style=""><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>20.<span style=""> </span>Sale of or lease of real properties subject to VAT.<span style=""> </span></span></b><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">Sale of real properties primarily for sale to customers or held for lease in the ordinary course of trade or business of the seller shall be subject to VAT.<span style=""> </span>(Rev. Regs. No. 16-2005, Sec. 4.106-3, 1<sup>st</sup> par.)<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify; text-indent: 0.5in;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">Thus, capital transactions of individuals are not subject to VAT.<span style=""> </span>Only real estate dealers are subject to VAT.<span style=""> </span><span style=""> </span><b style="">21.<span style=""> </span> On Jan. 10, 2008, X, a domestic corporation engaged in the real estate business, sold a building for P10,000,000.00.<span style=""> </span>Is the sale subject to the value-added tax (VAT)? If so, how much?<span style=""> </span>Explain</b>.<span style=""> </span><o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>SUGGESTED ANSWER:<span style=""> </span>Yes.<span style=""> </span>12% on the gross selling price because the sale was made in the ordinary course of trade of business of X, a domestic corporation engaged in the real estate business.<o:p></o:p></span></p> <p class="MsoNormal" style="margin-left: 0.25in; text-align: justify; text-indent: -0.25in;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><o:p> </o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><b style=""><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>22.<span style=""> </span><span style=""> </span>Sale of real property exempt from VAT.<span style=""> </span></span></b><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">The following sales of real properties are exempt from VAT, namely: <o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>a.<span style=""> </span>Sale<span style=""> </span>of<span style=""> </span>real properties not primarily held for sale to customers or held for lease in the ordinary course of trade or business;<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>b.<span style=""> </span>Sale<span style=""> </span>of<span style=""> </span>real<span style=""> </span>properties utilized for low-cost housing as defined by RA No. 7279, otherwise known as the “Urban and Development Housing Act of 1992” and other related laws, such as RA No. 7835 and RA No. 8763.<span style=""> </span><o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>xxx<span style=""> </span>xxx<span style=""> </span>xxx<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>c.<span style=""> </span>Sale<span style=""> </span>of real properties utilized for socialized housing as defined under RA No. 7279, and other related laws wherein the price ceiling per unit is P225,000.00 or as may from time to time be determined by the HUDCC and the NEDA and other related laws.<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>xxx<span style=""> </span>xxx<span style=""> </span>xxx <o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>d.<span style=""> </span>Sale<span style=""> </span>of residential lot valued at One Million Five Hundred Thousand Pesos (P1,500,000.00) and below, or house & lot and other residential dwellings valued at Two Million Give Hundred Thousand Pesos (P2,500,000.00) and below where the instrument of sale/transfer/disposition was executed on or after November 1, 2005, provided, That not later than January 31, 2009 and every three (3) years thereafter, the amounts stated herein shall be adjusted to its present value using the Consumer Price Index, as published by the National Statistics Office (NSO); provided, further, that such adjustment shall be published through revenue regulations to be issued not later than March 31 of each year. <o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>If two or more adjacent residential lots are sold or disposed in favor of one buyer, for the purpose of utilizing the lots as one residential lot, the sale shall be exempt from VAT only if the aggregate value of the lots do not exceed P1,500,000.00.<span style=""> </span>Adjacent residential lots, although covered by separate titles and/or separate tax declarations, when sold or disposed of to one and the same buyer, whether covered by one or separate Deed of Conveyance, shall be presumed as a sale of one residential lot.<span style=""> </span>[Rev. Regs. No. 4.109-1 (B), (p),<span style=""> </span>paraphrasing and numbering supplied]<o:p></o:p></span></p> <p class="MsoNormal" style="margin-left: 0.5in; text-align: justify; text-indent: -0.5in;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><o:p> </o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><b style=""><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span><span style=""> </span>23.<span style=""> </span>VAT on services and lease of properties.<o:p></o:p></span></b></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>a.<span style=""> </span>There<span style=""> </span>shall<span style=""> </span>be<span style=""> </span>levied, assessed, and collected, <o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>b.<span style=""> </span>a value-added tax equivalent to ten percent (10%) of gross receipts <o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>c.<span style=""> </span>derived from the sale or exchange of services, <o:p></o:p></span></p> <p class="MsoNormal" style="margin-left: 0.5in; text-align: justify; text-indent: -0.5in;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>1)<span style=""> </span>including the use or lease of properties. <o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>d.<span style=""> </span>Provided, That the President, upon the recommendation of the <u><span style="color: rgb(0, 32, 96);"><a href="http://www.dof.gov.ph/"><span style="color: rgb(0, 32, 96);">Secretary of Finance</span></a></span></u>, shall, effective January 1, 2006, raise the rate of value-added tax to twelve percent (12%), after any of the following conditions has been satisfied:<o:p></o:p></span></p> <p class="MsoNormal" style="margin-left: 0.5in; text-align: justify; text-indent: -0.5in;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>1)<span style=""> </span>Value-added tax collection as a percentage of Gross Domestic product (GDP) of the previous year exceeds two and four-fifth percent (2 4/5%); or<o:p></o:p></span></p> <p class="MsoNormal" style="margin-left: 0.5in; text-align: justify; text-indent: -0.5in;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>2)<span style=""> </span>National government deficit as a percentage of GDP of the previous year exceeds one and one-half percent (1 1/2%).<span style=""> </span>[NIRC of 1997, Sec. 108 (A),<i> </i>as amended by R.A. No. 9337, arrangement and numbering supplied]<o:p></o:p></span></p> <p class="MsoNormal" style="margin-left: 0.5in; text-align: justify; text-indent: -0.5in;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><o:p> </o:p></span></p> <p class="MsoNormal" style="margin-left: 0.5in; text-align: justify; text-indent: -0.5in;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span><o:p></o:p></span></p> <p style="text-align: justify;"><b style=""><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>24.<span style=""> </span><span style="">“Sale or exchange of services”, defined.<span style=""> </span></span></span></b><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">The term “sale or exchange of services” means the performance of all kinds of services in the Philippines for others for a fee, remuneration or consideration, whether in kind or in cash, including those performed or rendered by the following: <span style=""> </span><span style=""> </span><span style=""> </span><span style=""> </span>a.<span style=""> </span>construction and service contractors; <span style=""> </span><span style=""> </span><span style=""> </span>b.<span style=""> </span>stock, real estate, commercial, customs and immigration brokers; <span style=""> </span><span style=""> </span><span style=""> </span>c.<span style=""> </span>lessors of property, whether personal or real; <span style=""> </span><span style=""> </span>d.<span style=""> </span>persons engaged in warehousing services<span style=""> </span> e.<span style=""> </span>lessors or distributors of cinematographic films; <span style=""> </span><span style=""> </span>f.<span style=""> </span>persons engaged in milling, processing, manufacturing or repacking goods for others; <span style=""> </span><span style=""> </span><span style=""> </span>g.<span style=""> </span>proprietors, operators or keepers of hotels, motels, rest-houses, pension houses, inns, resorts; theaters, and movie houses;<span style=""> </span><span style=""> </span><span style=""> </span> h.<span style=""> </span>proprietors or operators of restaurants, refreshment parlors, cafes and other eating places, including clubs and caterers; <span style=""> </span><span style=""> </span><span style=""> </span>i.<span style=""> </span>dealers in securities; <span style=""> </span><span style=""> </span><span style=""> </span>j.<span style=""> </span>lending investors; <span style=""> </span><span style=""> </span><span style=""> </span><span style=""> </span>k.<span style=""> </span>transportation contractors on their transport of goods or cargoes, including persons who transport goods or cargoes for hire and other domestic common carriers by land relative to their transport of goods or cargoes; <span style=""> </span>l.<span style=""> </span>common carriers by air and sea relative to their transport of passengers, goods or cargoes from one place in the Philippines to another place in the Philippines; <span style=""> </span><span style=""> </span><span style=""> </span>m.<span style=""> </span>sales of electricity by generation companies, transmission, and/or<span style=""> </span>distribution companies; <span style=""> </span><span style=""> </span><span style=""> </span><span style=""> </span>n.<span style=""> </span>franchise grantees of electric utilities, telephone and telegraph, radio and television broadcasting and all other franchise grantees except franchise grantees of radio and/or television broadcasting whose annual gross receipts of the preceding year do not exceed Ten Million Pesos (P10,000,000.00), and franchise grantees of gas and water utilities;<span style=""> </span><span style=""> </span> o.<span style=""> </span> non-life insurance companies (except their crop insurances), including surety, fidelity, indemnity and bonding companies; and <span style=""> </span><span style=""> </span><span style=""> </span><span style=""> </span>p.<span style=""> </span>similar services regardless of whether or not the performance thereof calls for the exercise or use of the physical or mental faculties<b>.<span style=""> </span></b><span style="">[NIRC of 1997, Sec. 108 (A), as amended by </span>R.A. No. 9337; Rev. Regs. No. 16-2005, Sec. 4,108-2, 1<sup>st</sup> par., arrangement and numbering supplied]<o:p></o:p></span></p> <p class="MsoBodyTextIndent2" style="margin-left: 0in;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><o:p> </o:p></span></p> <p class="MsoNormal" style="text-align: justify; text-indent: 0.5in;"><b style=""><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">25.<span style=""> </span><i style="">X Corporation rendered technical services through its “work engineers” to PNB and SSS in the construction of their buildings.<span style=""> </span>The “work engineers” acted as overseers of X Corporation, rendering their professional services as employees of X corporation.<span style=""> </span>Should X Corporation be subjected to VAT or should it be subjected to tax on the professional services of those employees themselves?<span style=""> </span>Decide the case with reason. </i></span></b><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify; text-indent: 0.5in;"><u><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">SUGGESTED ANSWER</span></u><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">:<span style=""> </span>X Corporation is subject to VAT.<span style=""> </span>For reasons refer to no. 16.a, <i style="">supra,<o:p></o:p></i></span></p> <p class="MsoNormal" style="margin-left: 0.25in; text-align: justify; text-indent: -0.25in;"><i style=""><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><o:p> </o:p></span></i></p> <p class="MsoNormal" style="text-align: justify;"><b style=""><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>26.<span style=""> </span>Also included in the phrase “sale or exchange of services.<span style=""> </span><o:p></o:p></span></b></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>a.<span style=""> </span>The<span style=""> </span>lease<span style=""> </span>or the use of or the right or privilege to use any copyright, patent, design or model, plan, secret formula or process, goodwill, trademark, trade brand or other like property or right;<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>b.<span style=""> </span>The<span style=""> </span>lease<span style=""> </span>or <span style=""> </span>the<span style=""> </span>use<span style=""> </span>of, or the right to use any industrial, commercial or scientific equipment;<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>c.<span style=""> </span>The<span style=""> </span>supply<span style=""> </span>of scientific, technical, industrial or commercial knowledge or information;<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>d.<span style=""> </span>The<span style=""> </span>supply<span style=""> </span>of any assistance that is ancillary and subsidiary to and is furnished as a means of enabling the application or enjoyment of any such property, or right as is mentioned in subparagraph (2) hereof or any such knowledge or information as is mentioned in subparagraph (3) hereof; or<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>e.<span style=""> </span>The supply of services by a non-resident person or his employee in connection with the use of property or rights belonging to, or the installation or operation of any brand, machinery or other apparatus purchased from such non-resident person;<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>f.<span style=""> </span>The<span style=""> </span>supply of technical advice, assistance or services rendered in connection with technical management or administration of any scientific, industrial<span style=""> </span>or commercial undertaking, venture, project of scheme;<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>g.<span style=""> </span>The<span style=""> </span>lease<span style=""> </span>of motion picture films, film tapes and discs;<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>h.<span style=""> </span>The<span style=""> </span>lease <span style=""> </span>or<span style=""> </span>the<span style=""> </span>use<span style=""> </span>of<span style=""> </span>or the right to use radio, television, satellite transmission and cable television time.<span style=""> </span>(Rev. Regs. No. 16-2005, Sec. 4.108-2, 2<sup>nd</sup> par.)<o:p></o:p></span></p> <p class="MsoNormal" style="margin-left: 0.25in; text-align: justify; text-indent: -0.25in;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><o:p> </o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><b style=""><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>27.<span style=""> </span>Zero-rated Sales of Goods or Properties.<span style=""> </span></span></b><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">A zero-rated sale of goods or properties by a sale by a VAT-registered person is a taxable transaction for VAT purposes but the sale does not result in any output tax.<b style=""><o:p></o:p></b></span></p> <p class="MsoNormal" style="text-align: justify; text-indent: 0.25in;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">However, the input tax on the purchases of goods, properties or services related to such zero-rated sale shall be available as tax credit or refund in accordance with Rev. Regulations No. 16-2005.<span style=""> </span>(Rev. Regs. No. 16-2005, 1<sup>st</sup> par.)<o:p></o:p></span></p> <p class="MsoNormal" style="margin-left: 0.25in; text-align: justify; text-indent: -0.25in;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><o:p> </o:p></span></p> <p class="MsoNormal" style="text-align: justify; text-indent: 0.5in;"><b style=""><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">28.<span style=""> </span><span style=""> </span>What is the destination principle the VAT ?<o:p></o:p></span></b></p> <p class="MsoNormal" style="text-align: justify; text-indent: 0.5in;"><u><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">SUGGESTED ANSWER:</span></u><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>As a general rule, the VAT system uses the destination principle as a basis for the jurisdictional reach of the tax. <o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify; text-indent: 0.5in;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">Goods and services are taxed only in the country where they are consumed. Thus, exports are zero-rated, while imports are taxed.<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify; text-indent: 0.5in;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><o:p> </o:p></span></p> <p class="MsoNormal" style="text-align: justify; text-indent: 0.5in;"><b style=""><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">29.<span style=""> </span>Is there any exception to the destination principle ?<o:p></o:p></span></b></p> <p class="MsoNormal" style="text-align: justify; text-indent: 0.5in;"><u><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">SUGGESTED ANSWER:</span></u><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>Yes.<span style=""> </span>The law clearly provides for an exception to the destination principle; that is, for a zero percent VAT rate for services that are performed in the Philippines, "paid for in acceptable foreign currency and accounted for in accordance with the rules and regulations of the [BSP]."<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><b style=""><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><o:p> </o:p></span></b></p> <p class="MsoNormal" style="text-align: justify; text-indent: 0.4in;"><b style=""><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">30.<span style=""> </span>Rationale for zero-rating of exports.<span style=""> </span></span></b><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">The Philippine VAT system adheres to the Cross Border Doctrine, according to which, no VAT shall be imposed to form part of the cost of goods destined for consumption outside of the territorial border of the taxing authority. </span><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">[<i style="">Commissioner of Internal Revenue v. Toshiba Information Equipment (Phils.), Inc., </i>G. R.. No. 150154, August 9, 2005]<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>The “Cross Border Doctrine” is also known as the destination principle.<span style=""> </span><span style=""> </span></span><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">Hence, actual or constructive export of goods and services from the Philippines to a foreign country<span style=""> </span>must be zero-rated for VAT; while, those destined for use or consumption within the Philippines shall be imposed the twelve percent (12%) VAT. </span><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><o:p></o:p></span></p> <p class="MsoNormal" style="margin-left: 0.25in; text-align: justify; text-indent: -0.25in;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><o:p> </o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><b style=""><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>31.<span style=""> </span>Zero-rated sale distinguished from exempt transactions:<o:p></o:p></span></b></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>a.<span style=""> </span>A zero-rated sale is a taxable transaction but does not result in an output tax WHILE an exempt transaction is not subject to the output tax.<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>b.<span style=""> </span>The<span style=""> </span>input tax on the purchases of a VAT registered person who has zero-rated sales may be allowed as tax credits or refunded WHILE the seller in an exempt transaction is not entitled to any input tax on his purchases despite the issuance of a VAT invoice or receipt.<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>c.<span style=""> </span>Persons engaged in transactions which are zero rated being subject to VAT are required to register WHILE registration is optional for VAT-exempt persons.<o:p></o:p></span></p> <p class="MsoNormal" style="margin-left: 0.25in; text-align: justify; text-indent: -0.25in;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><o:p> </o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><b style=""><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>32.<span style=""> </span>Zero-rated sales by VAT-registered persons.<span style=""> </span></span></b><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">The following sales by VAT-registered persons shall be subject to zero percent (0%) rate:<o:p></o:p></span></p> <p class="MsoNormal" style="margin-left: 0.25in; text-align: justify; text-indent: -0.25in;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>a.<span style=""> </span>Export sales;<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify; text-indent: -0.25in;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>b.<span style=""> </span>Considered export sales under Executive Order No. 224;<o:p></o:p></span></p> <p class="MsoNormal" style="margin-left: 0.25in; text-align: justify; text-indent: -0.25in;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>c.<span style=""> </span>Foreign currency denominated sale; and<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>d.<span style=""> </span>Sales to persons or entities demed tax-exempt under special law or international agreement.<span style=""> </span>(Rev. Regs. No. 16-2005, Sec. 4.106-5, 2<sup>nd</sup> par., paraphrasing supplied)<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><o:p> </o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><b style=""><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>33.<span style=""> </span>Sale of gold to the Central Bank considered as export sales.<span style=""> </span></span></b><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">As export sales, the sale of gold to the Central Bank is zero-rated, hence, no tax is chargeable to it as purchaser. Zero rating is primarily intended to be enjoyed by the seller, which charges no output VAT but can claim a refund of or a tax credit certificate for the input VAT previously charged to it by suppliers. (<i style="">Commissioner of Internal Revenue v. Manila Mining Corporation, </i>G.R. No. 153204, August 31, 2005)<o:p></o:p></span></p> <p class="MsoNormal" style="margin-left: 0.25in; text-align: justify; text-indent: -0.25in;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><o:p> </o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><b style=""><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>34.<span style=""> </span>Sales to ecozone, such as PEZA, considered export-sale.<span style=""> </span></span></b><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">Notably, while an ecozone is geographically within the Philippines, it is deemed a separate customs territory and is regarded in law as foreign soil.<span style=""> </span>Sales by suppliers from outside the borders of the ecozone to this separate customs territory are deemed as exports and treated as export sales.<span style=""> </span>These sales are zero-rated or subject to a tax rate of zero percent.<span style=""> </span>(<i style="">Commissioner of Internal Revenue v. Sekisui Jushi Philippines, Inc., </i>G. R. No. 149671, July 21, 2006 citing various authorities)<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><o:p> </o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><b style=""><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>35.<span style=""> </span>“Ecozone”, defined.<span style=""> </span></span></b><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">An ECOZONE or a Special Economic Zone has been described as –<span style=""> </span>[S]elected areas with highly developed or which have the potential to be developed into agro-industrial, industrial, tourist, recreational, commercial, banking, investment and financial centers whose metes and bounds are fixed or delimited by Presidential Proclamations. An ECOZONE may contain any or all of the following: industrial estates (IEs), export processing zones (EPZs), free trade zones and tourist/recreational centers. <span style=""> </span><span style=""> </span>The national territory of the Philippines outside of the proclaimed borders of the ECOZONE shall be referred to as the Customs Territory.</span><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"> [<i style="">Commissioner of Internal Revenue v. Toshiba Information Equipment (Phils.), Inc., </i>G. R.. No. 150154, August 9, 2005]<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><b style=""><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><o:p> </o:p></span></b></p> <p class="MsoNormal" style="text-align: justify;"><b style=""><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>36.<span style=""> </span>Zero-rated sale of service, defined.<span style=""> </span></span></b><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">A zero-rated sale of service (by a VAT-registered person) is a taxable transaction for VAT purposes, but shall not result in any output tax.<span style=""> </span>However, the input tax on purchases of goods, properties or services related to such zero-rated sale shall be available as tax credit or refund in accordance with <i style="">Rev. Regs. No. 16-2005. </i>[Rev. Regs. No. 16-2005, Sec.<span style=""> </span>Sec. 4.108-5 (a), words in italics supplied)<b style=""><o:p></o:p></b></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><o:p> </o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><b style=""><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>37.<span style=""> </span>Zero-rating is an exception to the “destination principle”.<span style=""> </span></span></b><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">As a general rule, the value-added tax (VAT) system uses the destination principle. However, our VAT law itself provides for a clear exception, where the supply of service shall be zero-rated.<span style=""> </span>[<i style="">Commissioner of Internal Revenue v. American Express International, Inc. (Philippine Branch), </i>G. R. No. 152609, June 29, 2005]<b style=""><o:p></o:p></b></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>Destination principle:<span style=""> </span>No VAT shall be imposed to form part of the services destined outside of the territorial border of the taxing authority. It is also referred to as “Cross Border” doctrine.<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><o:p> </o:p></span></p> <p class="MsoNormal"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><o:p> </o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><b><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>38.<span style=""> </span>A foreign Consortium composed of BWSC-Denmark, Mitsui Engineering and Shipbuilding Ltd., and Misui and Co., Ltd., which entered into a contract with NAPOCOR for the operation and maintenance of two power barges appointed BWSC-Denmark as its coordination manager.<span style=""> </span>BWSCMI was established as the subcontractor to perform the actual work in the Philippines.<span style=""> </span>The Consortium paid BWSCMI in acceptable foreign exchange and accounted for in accordance with the rules and regulations of the BSP.<o:p></o:p></span></b></p> <p class="MsoNormal" style="text-align: justify;"><b><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>Through a February 14, 1995 ruling the BIR declared that BWSCMI may choose to register as a VAT persons subject to VAT at zero rate.<span style=""> </span>For 1996, it filed the proper VAT returns showing zero rating.<span style=""> </span>On December 29, 1997, believing that it is covered by Rev. Regs. 5-96, dated February<span style=""> </span>20, 1996, BWSCMI paid 10% output VAT for the period April-December 1996, through the Voluntary Assessment Program (VAP).<o:p></o:p></span></b></p> <p class="MsoNormal" style="text-align: justify;"><b><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>On January 7, 1999, BWSCMI was able to obtain a Ruling from the BIR reconfirming that it is subject to VAT at zero-rating.<span style=""> </span>On this basis, BWSCMI applied for a refund of the output VAT it paid.<o:p></o:p></span></b></p> <p class="MsoNormal" style="text-align: justify;"><b><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>a.<span style=""> </span>Is BWSCMI subject to the 10% VAT or is it zero rated ?<o:p></o:p></span></b></p> <p class="MsoNormal" style="text-align: justify;"><b><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span></span></b><u><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">SUGGESTED ANSWER:</span></u><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>Yes.<span style=""> </span>BWSCMI is not zero rated and is subject to the 10% VAT.<span style=""> </span>It is rendering service for the Consortium which is not doing business in the Philippines.<span style=""> </span>Zero-rating finds application only where the recipient of the services are other persons doing business outside of the Philippines.<span style=""> </span>BWSCMI provides services to the Consortium which by virtue of its contract with NAPOCOR is doing business within the Philippines.<span style=""> </span></span><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US">(<i style="">Commissioner of Internal Revenue v. Burmeister and Wain Scandinavian Contractor Mindanao, Inc., </i>G. R. No. 153205, January 22, 2007)<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><b><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>b.<span style=""> </span>Could it obtain a refund of the VAT it paid through the VAP ?<span style=""> </span>Explain.<o:p></o:p></span></b></p> <p class="MsoNormal" style="text-align: justify;"><b><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span></span></b><u><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">SUGGESTED ANSWER:</span></u><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>Yes. BWSCMI is entitled to refund of the 10% output VAT it paid the </span><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">based on the non-retroactivity of the prejudicial revocation of the BIR Rulings which held that it’s services<span style=""> </span>are subject to 0% VAT and which BWSCMI invoked in applying for refund of the output VAT. <span style="letter-spacing: -0.1pt;">(<i style="">Commissioner of Internal Revenue v. Burmeister and Wain Scandinavian Contractor Mindanao, Inc., supra</i>)<o:p></o:p></span></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span></span><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><b style=""><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>39.<span style=""> </span>Service, defined.<span style=""> </span></span></b><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">Service has been defined as “the art of doing something useful for a person or company for a fee” or “useful labor or work rendered or to be<span style=""> </span>rendered another for a fee.<span style=""> </span>[<i style="">Commissioner of Internal Revenue v. American Express International, Inc. (Philippine Branch), </i>G. R. No. 152609, June 29, 2005]<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><b style=""><i style=""><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><o:p> </o:p></span></i></b></p> <p class="MsoNormal" style="text-align: justify;"><b style=""><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>40.<span style=""> </span>Output tax, defined.<span style=""> </span></span></b><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">The value-added tax due on the sale or lease or taxable goods, properties or services by any VAT-registered person.<o:p></o:p></span></p> <p class="MsoNormal" style="margin-left: 0.25in; text-align: justify; text-indent: -0.25in;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><o:p> </o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><b style=""><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>41.<span style=""> </span>Input tax, defined.<span style=""> </span></span></b><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">The VAT<span style=""> </span>due on or paid by a VAT-registered person on importation of good or local purchases of goods or services, including lease or use of properties, in the course of his trade or business.<span style=""> </span>(Rev. Regs. No. 4.110-1, 1<sup>st</sup> par.)<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><o:p> </o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span><span style=""> </span><b style="">42.<span style=""> </span>Included in input tax.<span style=""> </span></b>It shall also include:<b style=""><o:p></o:p></b></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>a.<span style=""> </span>the<span style=""> </span>transitional input tax and <o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>b.<span style=""> </span>the presumptive input tax xxx.<span style=""> </span><o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>It includes<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>c.<span style=""> </span>input taxes which can be directly attributed to transactions subject to the VAT plus a ratable portion of any input tax which cannot be directly attributed to either the taxable or exempt activity.<span style=""> </span>(Rev. Regs. No. 4.110-1, 1<sup>st</sup> par., 2<sup>nd</sup> sentence,. And 2<sup>nd</sup> par., paraphrasing, arrangement and numbering supplied )<span style="letter-spacing: -0.1pt;"><o:p></o:p></span></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><o:p> </o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><b style=""><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>43.<span style=""> </span>The right to credit the input tax is a mere creation of law.</span></b><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"> Prior to the enactment of multi-stage sales taxation, the sales taxes paid at every level of distribution are not recoverable from the taxes payable. With the advent of Executive Order No. 273 imposing a 10% multi-stage tax on all sales, it was only then that the crediting of the input tax paid on purchase or importation of goods and services by VAT-registered persons against the output tax was established. This continued with the Expanded VAT Law (R.A. No. 7716), and The Tax Reform Act of 1997 (R.A. No. 8424). The right to credit input tax as against the output tax is clearly a privilege created by law, a privilege that also the law can limit. It should be stressed that a person has no vested right in statutory privileges. <i>(ABAKADA Guro Party List, etc. et al. vs. Ermita, </i><span style="">G.R. No. 168207, October 15, 2005, and companion cases, on the motion for reconsideration)</span><o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><o:p> </o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><b style=""><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>44.<span style=""> </span>Transitional input tax credits on beginning inventories.<span style=""> </span></span></b><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">Taxpayers who become VAT-registered persons upon exceeding the minimum turnover of P1,500,000.00 in any 12-month period, or who voluntarily register even if their turnover does not exceed P1,500,000.00 (except franchise grantees of radio and television broadcasting whose threshold is P10,000,000.00) shall be entitled to a transitional input tax on the inventory on hand as of the effectivity of their VAT registration, on the following:<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>a.<span style=""> </span>goods purchased for resale in their present condition;<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>b.<span style=""> </span>materials purchased for further processing, but which have not yet undergone processing;<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>c.<span style=""> </span>goods which have been manufactured by the taxpayer;<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>d.<span style=""> </span>goods in process for sale; or<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>e.<span style=""> </span>goods and supplies for use in the course of the taxpayer’s trade or business as a VAT-registered person.<span style=""> </span>[Rev. Regs. No. 16-2005, Sec.4.111-1, (a), 1<sup>st</sup> par., arrangement and numbering supplied]<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><o:p> </o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><b style=""><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>45.<span style=""> </span>Presumptive input tax credits.<span style=""> </span></span></b><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">Persons or firms engaged in the processing of sardines, mackerel, and milk, and in manufacturing refined sugar, cooking oil and packed noodle-based instant meals, shall be allowed a presumptive input tax, creditable against the output tax, equivalent to four percent (4%) of the gross value in money of their purchases of primary agricultural products which are used as inputs to their production.<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>As used in this paragraph, the term processing shall mean pasteurization, canning and activities which through physical or chemical process alter the exterior texture or form or inner substance of a product in such a manner as to prepare it for special use to which it could not have been put in its original form or condition.<span style=""> </span>[Rev. Regs. No. 16-2005, Sec.4.111-1, (b)]<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><o:p> </o:p></span></p> <p class="MsoNormal" style="margin-left: 0.25in; text-align: justify; text-indent: -0.25in;"><b style=""><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>46.<span style=""> </span>VAT-Exempt transactions, defined.<o:p></o:p></span></b></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>a.<span style=""> </span>The sale of goods or properties and/or services and the use or lease of properties that is<o:p></o:p></span></p> <p class="MsoNormal" style="margin-left: 0.5in; text-align: justify; text-indent: -0.5in;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>b.<span style=""> </span>not subject to VAT (output tax) and<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span><span style=""> </span>c.<span style=""> </span>the<span style=""> </span>seller<span style=""> </span>is<span style=""> </span>not<span style=""> </span>allowed any tax credit on VAT (input tax) purchases.<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>The person making the exempt sale of goods, properties or services shall not bill any output tax to his customers because the said transaction is not subject to VAT.<span style=""> </span>[Rev. Regs. No. 16-2005, Sec. 4.109-1 (A), arrangement and numbering supplied]<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><o:p> </o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><b style=""><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>47.<span style=""> </span>VAT-exempt transactions distinguished from VAT-exempt entities. <span style=""> </span><span style=""> </span><span style=""> </span></span></b><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">a.<b style=""><span style=""> </span><span style=""> </span></b>An <span style="">exempt transaction</span>, on the one hand, involves goods or services which, by their nature, are specifically listed in and expressly exempted from the VAT under the Tax Code, without regard to the tax status – VAT-exempt or not – of the party to the transaction.<span style=""> </span><span style=""> </span>An <span style="">exempt party</span>, on the other hand, is a person or entity granted VAT exemption under the Tax Code, a special law or an international agreement to which the Philippines is a signatory, and by virtue of which its taxable transactions become exempt from VAT.<span style=""> </span>[Commissioner of Internal Revenue v. Toshiba Information Equipment (Phils.), Inc., G. R. No. 150154, August 9, 2005]<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>b.<span style=""> </span>An exempt transaction shall not be the subject of any billing for output VAT but it shall not also be allowed any input tax credits WHILE an exempt party being zero-rated is allowed to claim input tax credits.<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><o:p> </o:p></span></p> <p class="MsoNormal" style="text-align: justify; text-indent: -0.5in;"><b style=""><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>48.<span style=""> </span>Exempt transactions.<span style=""> </span></span></b><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">(Subject to the election by a VAT-registered person not to be subject to the value-added ta<i style="">x), </i>the following shall be exempt from VAT:<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify; text-indent: -0.5in;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>(A) Sale or importation of agricultural and marine food products in their original state, livestock and poultry of a kind generally used as, or yielding or producing foods for human consumption; and breeding stock and genetic materials therefor.<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify; text-indent: -0.5in;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>Livestock shall include cows, bulls and calves, pigs, sheep, goats and rabbits.<span style=""> </span>Poultry shall include fowls, ducks, geese and turkey,<span style=""> </span>Livestock or poultry does not include fighting cocks, race horses, zoo animals and other animals generally considered as pets.<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify; text-indent: -0.5in;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>Marine food products shall include fish and crustaceans, such as, but not limited to, eels, trout, lobster, shrimps, prawns, oysters, mussels and clams.<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify; text-indent: -0.5in;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>Meat, fruit, fish, vegetables and other agricultural and marine food<span style=""> </span>Products classified under this paragraph shall be considered in their original state even if they have undergone the simple processes of preparation or preservation for the market, such as freezing, drying, salting, broiling, roasting, smoking or stripping, including those using advanced technological means of packaging, such as shrink wrapping in plastics, vacuum packing, tetra-pack, and other similar packaging methods.<span style=""> </span>Polished and/or husked rice, corn grits, raw cane sugar and molasses, ordinary salt, and copra shall be considered in their original state.<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify; text-indent: -0.5in;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>Sugar whose content of sucrose by weight, in the dry state, has a polarimeter reading of 99.5o and above are presumed to be refined sugar.<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify; text-indent: -0.5in;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>Cane sugar produced from the following shall be presumed, for internal revenue purposes, to be refined sugar:<o:p></o:p></span></p> <p class="MsoNormal" style="margin-left: 1in; text-align: justify; text-indent: -0.5in;"><!--[if !supportLists]--><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style="">(1)<span style="font-family: "Times New Roman"; font-style: normal; font-variant: normal; font-weight: normal; font-size: 7pt; line-height: normal; font-size-adjust: none; font-stretch: normal;"> </span></span></span><!--[endif]--><span dir="ltr"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">product of a refining process,<o:p></o:p></span></span></p> <p class="MsoNormal" style="margin-left: 1in; text-align: justify; text-indent: -0.5in;"><!--[if !supportLists]--><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style="">(2)<span style="font-family: "Times New Roman"; font-style: normal; font-variant: normal; font-weight: normal; font-size: 7pt; line-height: normal; font-size-adjust: none; font-stretch: normal;"> </span></span></span><!--[endif]--><span dir="ltr"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">products of a sugar refinery, or<o:p></o:p></span></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>(3)<span style=""> </span>product of a production line of a sugar mill accredited by the BIR to be producing sugar with polarimeter reading of 99.5o and above, and for which the quedanissued therefor, and verified by the Sugar Regulatory Administration, identifies the same to be of a polarimeter reading of 99.5o and above.<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>Bagasse is not included in the exemption provided for under this section.<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>(B) <span style=""> </span>Sale or importation of fertilizers; seeds, seedlings and fingerlings; fish, prawn, livestock and poultry feeds, including ingredients, whether locally produced or imported, used in the manufacture of finished feeds (except specialty feeds for race horses, fighting cocks, aquarium fish, zoo animals and other animals generally considered as pets);<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>“Specialty feeds” refers to non-agricultural feeds or food for race horses, fighting cocks, aquarium fish, zoo animals and other animals generally considered as pets.<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>(C) <span style=""> </span>Importation of personal and household effects belonging to the residents of the Philippines returning from abroad and nonresident citizens coming to resettle in the Philippines:<span style=""> </span><span style="">Provided, </span>That such goods are exempt from customs duties under the Tariff and Customs Code of the Philippines;<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>(D) <span style=""> </span>Importation of professional instruments and implements, wearing apparel, domestic animals, and personal household effects (except any vehicle, vessel, aircraft, machinery, other goods for use in the manufacture and merchandise of any kind in commercial quantity) belonging to persons coming to settle in the Philippines, for their own use and not for sale, barter or exchange, accompanying such persons, or arriving within ninety (90) days before or after their arrival, upon the production of evidence satisfactory to the <a href="http://www.bir.gov.ph/">Commissioner</a> of Internal Revenue, that such persons are actually coming to settle in the Philippines and that the change of residence is <span style="">bona fide</span>;<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>(E) Services subject to percentage tax under Title V of the Tax Code, as enumerated below:<o:p></o:p></span></p> <p class="MsoNormal" style="margin-left: 0.5in; text-align: justify; text-indent: -0.5in;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>(1)<span style=""> </span>Sale or lease of goods or properties or the performance of services of non-VAT-registered persons, other than the transactions mentioned in paragraphs (A) to (U) of Sec. 109 (1) of the Tax Code, the annual sales and/or receipts of which does not exceed the amount of One<span style=""> </span>Million Five Hundred thousand Pesos (P1,500,000.00), Provided, That not later than January 31, 2009 and every three (3) years thereafter, the amount herein stated shall be adjusted to its present value using the Consumer Price Index, as published by the National Statistics Office (NSO).<span style=""> </span>(Sec. 116, Tax Code)<o:p></o:p></span></p> <p class="MsoNormal" style="margin-left: 0.5in; text-align: justify; text-indent: -0.5in;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>(2)<span style=""> </span>Services rendered by domestic common carriers by land for the transport of passengers and keepers of garages.<span style=""> </span>(Sec. 117)<o:p></o:p></span></p> <p class="MsoNormal" style="margin-left: 0.5in; text-align: justify; text-indent: -0.5in;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>(3)<span style=""> </span>Services rendered by international air/shipping carriers.<span style=""> </span>(Sec. 118)<o:p></o:p></span></p> <p class="MsoNormal" style="margin-left: 0.5in; text-align: justify; text-indent: -0.5in;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>(4)<span style=""> </span>Service rendered by franchise grantees of radio and/or television broadcasting whose annual gross receipts of the preceding year do not exceed Ten Million Pesos (P10,000,000.00) and by franchises of gas and water utilities.<span style=""> </span>(Sec. 119)<o:p></o:p></span></p> <p class="MsoNormal" style="margin-left: 0.5in; text-align: justify; text-indent: -0.5in;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>(5)<span style=""> </span>Service rendered for overseas dispatch message or conversation originating from the Philippines.<span style=""> </span>(Sc. 120)<o:p></o:p></span></p> <p class="MsoNormal" style="margin-left: 0.5in; text-align: justify; text-indent: -0.5in;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>(6)<span style=""> </span>Services rendered by any person, company or corporation (except purely cooperative companies or associations ) doing life insurance business of any sort in the Philippines.<span style=""> </span>(Sec. 123)<o:p></o:p></span></p> <p class="MsoNormal" style="margin-left: 0.5in; text-align: justify; text-indent: -0.5in;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>(7)<span style=""> </span>Services rendered by fire, marine or miscellaneous insurance agents of foreign insurance companies.<span style=""> </span>(Sec. 124)<o:p></o:p></span></p> <p class="MsoNormal" style="margin-left: 0.5in; text-align: justify; text-indent: -0.5in;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>(8)<span style=""> </span>Services of proprietors, lessees or operators of cockpits, cabarets, night or day clubs, boxing exhibitions professional basketball games, jai-Alai and race tracks.<span style=""> </span>(Sec. 125). and<o:p></o:p></span></p> <p class="MsoNormal" style="margin-left: 0.5in; text-align: justify; text-indent: -0.5in;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>(9)<span style=""> </span>Receipts on sale, barter or exchange of shares of stock listed and traded through the local stock exchange or through initial public offering.<span style=""> </span>(Sec. 127)<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>(F) <span style=""> </span>Services by agricultural contract growers and milling for others of palay into rice, corn into grits and sugar cane into raw sugar;<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>“Agricultural contract growers” refers to those persons producing for others poultry, livestock or other agricultural and marine food products in their original state.<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>(G) <span style=""> </span>Medical, dental, hospital and veterinary services except those rendered by professionals;<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>Laboratory services are exempted.<span style=""> </span>If the hospital or clinic operates a pharmacy or drug store, the sale of drugs and medicine is subject to VAT.<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>(H) <span style=""> </span>Educational services rendered by private educational institutions, duly accredited by the <a href="http://www.deped.gov.ph/">Department of Education (DEPED)</a>, the <a href="http://www.ched.gov.ph/">Commission on Higher Education (CHED)</a>, the <a href="http://www.tesda.gov.ph/">Technical Education And Skills Development Authority (TESDA) </a>and those rendered by government educational institutions;<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>“Educational services” shall refer to academic, technical or vocational education provided by private educational institutions duly accredited by the DepED, the CHED and TESDA and those rendered by government educational institutions and it does not include seminars, in-service training, review classes and other similar services rendered by persons who are not accredited by the DepED, the CHED and/or the TESDA.<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>(I) <span style=""> </span>Services rendered by individuals pursuant to an employer-employee relationship;<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>(J) <span style=""> </span>Services rendered by regional or area headquarters established in the Philippines by multinational corporations which act as supervisory, communications and coordinating centers for their affiliates, subsidiaries or branches in the Asia-Pacific Region and do not earn or derive income from the Philippines;<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>(K) <span style=""> </span>Transactions which are exempt under international agreements to which the Philippines is a signatory or under special laws, except those under Presidential Decree No. 529 – Petroleum Exploration Concessionaires under the Petroleum Act of 1949; and;<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>(L) <span style=""> </span>Sales by agricultural cooperatives duly registered with the <a href="http://www.cda.gov.ph/">Cooperative Development Authority</a> (CDA)<span style=""> </span>to their members as well as sale of their produce, whether in its original state or processed form, to non-members; their importation of direct farm inputs, machineries and equipment, including spare parts thereof, to be used directly and exclusively in the production and/or processing of their produce; <o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>(M) <span style=""> </span>Gross receipts from lending activities by credit or multi-purpose cooperatives duly registered and in good standing with the <a href="http://www.cda.gov.ph/">Cooperative Development Authority</a>;<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>(N) <span style=""> </span>Sales by non-agricultural, non-electric and non-credit cooperatives duly registered with the <a href="http://www.cda.gov.ph/">Cooperative Development Authority</a>:<span style=""> </span><span style="">Provided, </span>That the share capital contribution of each member does not exceed Fifteen thousand pesos (P15,000) and regardless of the aggregate capital and net surplus ratably distributed among the members; <o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>Importation by non-agricultural, non-electric and non-credit cooperatives of machineries and equipment, including spare parts thereof, to be used by them are subject to VAT.<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>(O) <span style=""> </span>Export sales by persons who are not VAT-registered;<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>(P) <span style=""> </span>Sale of real properties not primarily held for sale to customers or held for lease in the ordinary course of trade or business, or real property utilized for low-cost and socialized housing as defined by Republic Act No. 7279, otherwise known as the Urban Development and Housing Act of 1992, and other related laws, such as RA No. 7835 and RA No. 8765, residential lot valued at One million five hundred thousand pesos (P 1,500,000) and below, house and lot, and other residential dwellings valued at Two million five hundred thousand pesos (P 2,500,000) and below:<span style=""> </span><span style="">Provided, </span>That not later than January 31,<b> </b>2009 and every three (3) years thereafter, the amounts herein stated shall be adjusted to<b> </b>their present values using the Consumer Price Index, as published by the <a href="http://www.census.gov.ph/">National Statistics Office (NSO)</a>; <o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>(Q) <span style=""> </span>Lease of a residential unit with a monthly rental not exceeding Ten thousand pesos (P 10,000) <span style="">Provided</span>, That not later than January 31,<b> </b>2009 and every three (3) years thereafter, the amount herein stated<b> </b>shall be adjusted to its present value using the Consumer Price Index as published by the <a href="http://www.census.gov.ph/">National Statistics Office (NSO)</a>;<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>(R) <span style=""> </span>Sale, importation, printing or publication of books and any newspaper, magazine, review or bulletin which appears at regular intervals with fixed prices for subscription and sale and which is not devoted principally to the publication of paid advertisements;<o:p></o:p></span></p> <p class="MsoNormal" style="margin-left: 0.25in; text-align: justify; text-indent: -0.25in;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><o:p> </o:p></span></p> <p class="MsoBodyTextIndent" style="margin-left: 0in; text-indent: 0.5in;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">49.<span style=""> </span>X is engaged in the importation and sale of books and magazines.<span style=""> </span>Is the importation of books and magazines subject to the 10% VAT?<span style=""> </span>Explain.<span style=""> </span></span><span style="font-size: 10.5pt; font-family: Arial; font-weight: normal;" lang="EN-US"><o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>SUGGESTED ANSWER:<span style=""> </span>No.<span style=""> </span>For reasons, refer to no. (R), supra.<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><o:p> </o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>(S) <span style=""> </span>Sale, importation or lease of passenger or cargo vessels and aircraft, including engine, equipment and spare parts thereof for domestic or international transport operations;<span style=""> </span>Provided, that the exemption from VAT on the importation and local purchase of passenger and/or cargo vessels shall be limited to those of one hundred fifty (150) tons and above, including engine and spare parts of said vessels; Provided, further, that the vessels be imported shall comply with the age limit requirement, at the time of acquisition counted from the date of the vessel’s original commissioning, as follows:<span style=""> </span>(i)<span style=""> </span>for passenger and/or cargo vessels, the age limit is fifteen years (15) years old,<span style=""> </span>(ii)<span style=""> </span>for tankers, the age limit is ten (10) years old, and (iii)<span style=""> </span>For high-speed passenger cars, the age limit is five (5) years old, Provided, finally, that exemption shall be subject to the provisions of section 4 of Republic Act No. 9295, otherwise known as “The Domestic Shipping Development Act of 2004.”<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>(T) <span style=""> </span>Importation of fuel, goods and supplies by persons engaged in international shipping or air transport operations; Provided, that the said fuel,<span style=""> </span>goods and supplies shall be used exclusively or shall pertain to the transport of goods and/or passenger from a port in the Philippines directly to a foreign port without stopping at any other port in the Philippines; provided, further, that if any portion of such fuel, goods or supplies is used for purposes other than that mentioned in this paragraph, such portion of fuel, goods and supplies shall be subject to 10% VAT (now 12%); <o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>(U) Services of banks, non-bank financial intermediaries performing quasi-banking functions, and other non-bank financial intermediaries; and<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>(V) <span style=""> </span>Sale or lease of goods or properties or the performance of services other than the transactions mentioned in the preceding paragraphs, the gross annual sales and/or receipts do not exceed the amount of One million five hundred thousand pesos (P1,500,000):<span style=""> </span><span style="">Provided, </span>That not later than January 31,<b> </b>2009 and every three (3) years thereafter, the amount herein stated<b> </b>shall be adjusted to its present value using the Consumer Price Index as published by the <a href="http://www.census.gov.ph/">National Statistics Office (NSO)</a>.<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>For purposes of the threshold of P1,500,000.00, the husband and wife shall be cnsidered separate taxpayers.<span style=""> </span>However, the aggregation rule for each taxpayer shall apply.<span style=""> </span>For instance, if a profesional, aside from the practice ofhis profession, also derives revenue from other lines of business which are otherwise subject to VAT, the same shall be combined for purposes of determining whether the threshold has been exceeded.<span style=""> </span>Thus, the VAT-exempt sales shall to be icluded in determining the threshold. [NIRC of 1997, Sec. 109 (1), as amended by R. A. No. 9337; words in italics from Rev. Regs. No. 16-2005, Sec. 4.109-1 (B), words in parentheses supplied] <o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><b style=""><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>50.<span style=""> </span>Tax-exempt may elect to be subject<span style=""> </span>to tax</span></b><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">. A VAT-registered person may elect that the tax exemption not apply to its sale of goods or properties or services:<span style=""> </span><i>Provided, </i>That an election made under<span style=""> </span>shall be irrevocable for a period of three (3) years from the quarter the election was made. (Rev. Regs. No. 16-2005, Sec. 4,109-2, wordings not verbatim)<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><o:p> </o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><b style=""><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>51.<span style=""> </span>Is there any tax to be paid by persons exempt from VAT.<span style=""> </span><o:p></o:p></span></b></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>a.<span style=""> </span>Any person, whose sales or receipts are exempt under Sec. 109 (1) (V) of the Tax Code<i style="">, <o:p></o:p></i></span></p> <p class="MsoNormal" style="margin-left: 0.5in; text-align: justify;"><i style=""><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>(V) Sale or lease of goods or properties or the performance of services other than the transactions mentioned in the preceding paragraphs, the gross annual sales and/or receipts do not exceed the amount of One million five hundred thousand pesos (P1,500,000):<span style=""> </span><span style="">Provided, </span>That not later than January 31,<b> </b>2009 and every three (3) years thereafter, the amount herein stated<b> </b>shall be adjusted to its present value using the Consumer Price Index as published by the <a href="http://www.census.gov.ph/">National Statistics Office (NSO)</a>, </span></i><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">from the payment of VAT and <o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>b.<span style=""> </span>who is not a VAT-registered person <o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>c.<span style=""> </span>shall pay a tax equivalent to three percent (3%) of his gross monthly sales or receipts; <o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>Provided, that cooperatives shall be exempt from the three (3%) gross receipts tax herein imposed.<span style=""> </span>(Rev. Regs. No. 16-2005, Sec. 4.116-1, arrangement, numbering and words in italics supplied)<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><o:p> </o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><b style=""><u><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US">INTERNAL REVENUE TAX RETURNS AND <span style=""> </span>WITHHOLDING</span></u></b><u><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><o:p></o:p></span></u></p> <p class="MsoNormal" style=""><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><o:p> </o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span><b style="">1. <span style=""> </span>Income tax returns</b> being <b style="">public documents</b>, until controverted by competent evidence, are competent evidence, are <i style="">prima facie</i> correct with respect to the entries therein.<span style=""> </span><i style="">(Ropali Trading v. NLRC, et al., </i>296 SCRA 309, 317)<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span><o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><b style=""><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span>2.<span style=""> </span><span style=""> </span>A withholding agent is explicitly made personally liable under the Tax Code for the payment of the tax required to be withheld,</span></b><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"> in order to compel the withholding agent to withhold the tax under any and all circumstances. In effect, the responsibility for the collection of the tax as well as the payment thereof is concentrated upon the person over whom the Government has jurisdiction.<span style=""> </span>(Filipinas Synthetic Fiber Corporation v. Court of Appeals, et al., G.R. Nos. 118498 & 124377, October 12, 1999)<span style=""> </span>The system facilitates tax collection.<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><o:p> </o:p></span></p> <p><span style="font-size: 10.5pt; font-family: Arial;" lang="EN">“Sec. 51. Individual Return. – <o:p></o:p></span></p> <p><span style="font-size: 10.5pt; font-family: Arial;" lang="EN">“(A) Requirements. – <o:p></o:p></span></p> <p><span style="font-size: 10.5pt; font-family: Arial;" lang="EN">“(1) Except as provided in paragraph (2) of this Subsection, the following individuals are required to file an income tax return:<o:p></o:p></span></p> <p><span style="font-size: 10.5pt; font-family: Arial;" lang="EN">“(a) x x x;<o:p></o:p></span></p> <p><span style="font-size: 10.5pt; font-family: Arial;" lang="EN">“x x x.<o:p></o:p></span></p> <p><span style="font-size: 10.5pt; font-family: Arial;" lang="EN">“(2) The following individuals shall not be required to file an income tax return:<o:p></o:p></span></p> <p><span style="font-size: 10.5pt; font-family: Arial;" lang="EN">“(a) x x x;<o:p></o:p></span></p> <p><span style="font-size: 10.5pt; font-family: Arial;" lang="EN">“(b) An individual with respect to pure compensation income, as defined in Section 32(A)(1), derived from sources within the Philippines, the income tax on which has been correctly withheld under the provisions of Section 79 of this Code: Provided, That an individual deriving compensation concurrently from two or more employers at any time during the taxable year shall file an income tax return:<o:p></o:p></span></p> <p><span style="font-size: 10.5pt; font-family: Arial;" lang="EN">“(c) x x x; and<o:p></o:p></span></p> <p><span style="font-size: 10.5pt; font-family: Arial;" lang="EN">“(d) A minimum wage earner as defined in Section 22(HH) of this Code or an individual who is exempt from income tax pursuant to the provisions of this Code and other laws, general or special.<o:p></o:p></span></p> <p><span style="font-size: 10.5pt; font-family: Arial;" lang="EN">“x x x.”<span style=""> </span>(Sec. 51, NIRC of 1997 as amended by R.A. No. 9504)<o:p></o:p></span></p> <p><span style="font-size: 10.5pt; font-family: Arial;" lang="EN"><span style=""> </span>“Sec. 79. Income Tax Collected at Source. – <o:p></o:p></span></p> <p><span style="font-size: 10.5pt; font-family: Arial;" lang="EN">“(A) Requirement of Withholding. – Except in the case of a minimum wage earner as defined in Section 22(HH) of this Code, every employer making payment of wages shall deduct and withhold upon such wages a tax determined in accordance with the rules and regulations to be prescribed by the Secretary of Finance, upon recommendation of the Commissioner.<o:p></o:p></span></p> <p><span style="font-size: 10.5pt; font-family: Arial;" lang="EN">“x x x.”<span style=""> </span>(Sec. 79 (A) , NIRC of 1997, as amended by R.A. No. 9504)<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><o:p> </o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><o:p> </o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><o:p> </o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><b style=""><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span>3.<span style=""> </span><span style=""> </span>“A’ erroneously withheld the amount of 15% from the selling price of books authored by “W” when the correct rate should have been 10% only.<span style=""> </span>Since “W” is out of the country, “A” applied for a refund of the excess withholding of 5%.<span style=""> </span>May “A” properly apply for the refund ?<span style=""> </span>Explain.<o:p></o:p></span></b></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span><u>SUGGESTED ANSWER:</u><span style=""> </span>Yes. In applications for refund, the withholding agent is a taxpayer because if he does not pay the tax shall be collected from him. <i style="">(Commissioner of Internal Revenue v. Procter & Gamble Philippine Manufacturing Corporation, </i>204 SCRA 377, 383-386), <o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><o:p> </o:p></span></p> <p class="MsoNormal" style=""><b style=""><u><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US">PENALTIES, INTERESTS AND SURCHARGES</span></u></b><u><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><o:p></o:p></span></u></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><o:p> </o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><b style=""><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US">1. <span style=""> </span>Surtax or surcharge, also known as the civil penalties, defined.</span></b><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>These are the amounts imposed in addition to the tax required.<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>They are in the nature of penalties and shall be collected at the same time, in the same manner, and as part of the tax.<span style=""> </span>[Sec.248 (A), NIRC of 1997]<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><o:p> </o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span><b style="">2.<span style=""> </span><span style=""> </span>The two (2) kinds of civil penalties: <o:p></o:p></b></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>a.<span style=""> </span>the 25% surcharge for late filing or late payment [Sec. 248 (A), NIRC of 1997] (also known as the delinquency surcharge), and <o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span>b.<span style=""> </span>the 50% willful neglect or fraud surcharge.<span style=""> </span>[Sec. 248 (B), <i style="">Ibid.</i>]<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><o:p> </o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span><b style="">3.<span style=""> </span><span style=""> </span>Deficiency income tax, defined. </b><span style=""> </span>The amount by which the tax imposed under the NIRC of 1997 exceeds the amount shown as the tax due by the taxpayer upon his return.<span style=""> </span>[Sec. 56 (B) (1), NIRC of 1997]<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><o:p> </o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span><b style="">4.<span style=""> </span><span style=""> </span>Deficiency interest, defined.<span style=""> </span></b><span style=""> </span>The interest assessed and collected on any unpaid amount of tax at the rate of 20% per annum or such higher rate as may be prescribed by regulations, from the date prescribed for payment until the amount is fully paid.<span style=""> </span>[Sec. 249 (A) (B), NIRC of 1997]<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><o:p> </o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span><b style="">5.<span style=""> </span><span style=""> </span>Delinquency interest, defined.<span style=""> </span></b><span style=""> </span>The interest assessed and collected on the unpaid amount until fully paid where there is failure on the part of the taxpayer to pay the amount die on any return required to be filed; or the amount of the tax due for which no return is required; or a deficiency tax, or any surcharge or interest thereon, on the date appearing in the notice and demand by the Commissioner of Internal Revenue.<span style=""> </span>[Sec.249 (c), NIRC of 1997]<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><o:p> </o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial;" lang="EN-US"><span style=""> </span><b style="">6.<span style=""> </span><span style=""> </span>Compromise penalty, defined. </b><span style=""> </span>The amount agreed upon between the taxpayer and the Government to be paid as a penalty in cases of a compromise.<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><o:p> </o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><o:p> </o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span><b style="">7.<span style=""> </span>After resolving the issues the BIR Commissioner reduced the assessment.<span style=""> </span>Was it proper to impose delinquency interest despite the reduction of the assessment ?<span style=""> </span>Why ?<o:p></o:p></b></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span>ANSWER:<span style=""> </span>Yes.<span style=""> </span>The intention of the law is to discourage delay in the payment of taxes due to the State and in this sense the surcharge and interest charged are not penal but compensatory in nature – they are compensation to the State for the delay in payment, or for the concomitant tuse of the funds by the taxpayer beyond the date he is supposed to have paid them to the State.<span style=""> </span>(<i style="">Bank of the Philippine Islands v. Commissioner of Internal Revenue, </i>G. R. No. 137002, July 27, 2006)<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><o:p> </o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span><b style="">8.<span style=""> </span>As a result of divergent rulings on whether it is subject to tax or not, the taxpayer was not able to pay his taxes on time.<span style=""> </span>Imposed surcharges and interests for such delay, the taxpayer not invokes good faith with the BIR countering by saying that good faith is not a valid defense for violation of a special law.<span style=""> </span>Furthermore, the BIR further raises the defense that the government is not bound by the errors of its agents.<span style=""> </span>Who is correct ?<o:p></o:p></b></span></p> <p class="MsoNormal" style="text-align: justify;"><b style=""><i style=""><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US"><span style=""> </span></span></i></b><span style="font-size: 10.5pt; font-family: Arial; letter-spacing: -0.1pt;" lang="EN-US">ANSWER:<span style=""> </span>The taxpayer is correct. The settled rule is that good faith and honest belief that one is not subject to tax on the basis of previous interpretation of government agencies tasked to implement the tax, are sufficient justification to delete the imposition of surcharges.<span style=""> </span>(<i style="">Michel J. Lhuillier Pawnshop, Inc. v. Commissioner of Internal Revenue, </i>G. R. No. 166786, September 11, 2006)<o:p></o:p></span></p> Anonymoushttp://www.blogger.com/profile/03321018346771806482noreply@blogger.com1tag:blogger.com,1999:blog-5764462155582353229.post-21607192142426293292008-09-04T10:50:00.000+08:002008-09-04T10:55:38.287+08:00LEGAL WHATCHAMACALLIT<meta equiv="Content-Type" content="text/html; charset=utf-8"><meta name="ProgId" content="Word.Document"><meta name="Generator" content="Microsoft Word 10"><meta name="Originator" content="Microsoft Word 10"><link rel="File-List" href="file:///C:%5CUsers%5CVenny%5CAppData%5CLocal%5CTemp%5Cmsohtml1%5C02%5Cclip_filelist.xml"><link rel="Edit-Time-Data" href="file:///C:%5CUsers%5CVenny%5CAppData%5CLocal%5CTemp%5Cmsohtml1%5C02%5Cclip_editdata.mso"><!--[if !mso]> <style> v\:* {behavior:url(#default#VML);} o\:* {behavior:url(#default#VML);} w\:* {behavior:url(#default#VML);} .shape {behavior:url(#default#VML);} </style> <![endif]--><o:smarttagtype namespaceuri="urn:schemas-microsoft-com:office:smarttags" name="City"></o:smarttagtype><o:smarttagtype namespaceuri="urn:schemas-microsoft-com:office:smarttags" name="State"></o:smarttagtype><o:smarttagtype namespaceuri="urn:schemas-microsoft-com:office:smarttags" name="place"></o:smarttagtype><o:smarttagtype namespaceuri="urn:schemas-microsoft-com:office:smarttags" name="date"></o:smarttagtype><o:smarttagtype namespaceuri="urn:schemas-microsoft-com:office:smarttags" name="country-region"></o:smarttagtype><o:smarttagtype namespaceuri="urn:schemas-microsoft-com:office:smarttags" name="PlaceName"></o:smarttagtype><o:smarttagtype namespaceuri="urn:schemas-microsoft-com:office:smarttags" name="PlaceType"></o:smarttagtype><!--[if gte mso 9]><xml> <w:worddocument> <w:view>Normal</w:View> <w:zoom>0</w:Zoom> <w:compatibility> <w:breakwrappedtables/> <w:snaptogridincell/> <w:applybreakingrules/> <w:wraptextwithpunct/> <w:useasianbreakrules/> <w:usefelayout/> </w:Compatibility> <w:browserlevel>MicrosoftInternetExplorer4</w:BrowserLevel> </w:WordDocument> </xml><![endif]--><!--[if !mso]><object classid="clsid:38481807-CA0E-42D2-BF39-B33AF135CC4D" id="ieooui"></object> <style> st1\:*{behavior:url(#ieooui) } </style> <![endif]--><style> <!-- /* Font Definitions */ @font-face {font-family:SimSun; 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<br /><!--[endif]--></p> <p class="MsoTitle"><span style="font-size: 7pt;"><o:p> </o:p></span></p> <p class="MsoNormal" style="text-align: center;" align="center"><b style=""><span style="font-size: 24pt; font-family: "Arial Black";"><span style=""> </span>“</span></b><b style=""><span style="font-size: 18pt; font-family: "Arial Black";">LEGAL WHATCHAMACALLIT”</span></b><b style=""><span style="font-size: 16pt; font-family: "Arial Black";"><o:p></o:p></span></b></p> <p class="MsoNormal" style="text-align: center;" align="center"><span style="font-family: Arial;">VER. 2008.09.01<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: center;" align="center"><span style="font-family: Arial;">copyrighted 2008<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: center;" align="center"><b style=""><span style="font-family: Arial;"><o:p> </o:p></span></b></p> <p class="MsoNormal" style="text-align: center;" align="center"><span style="font-family: Arial;">Researched and prepared by <o:p></o:p></span></p> <p class="MsoNormal" style="text-align: center;" align="center"><span style="font-family: Arial;">the </span><b style=""><span style="font-size: 14pt; font-family: Arial;">PRiMUS</span></b><span style="font-family: Arial;"> Board of Consultants</span><span style="font-size: 11pt; font-family: Arial;"><o:p></o:p></span></p> <p class="MsoNormal" style="text-align: center;" align="center"><span style="font-family: Arial;">Prof. Abelardo T. Domondon<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: center;" align="center"><span style="font-family: Arial;">Principal Consultant<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: center;" align="center"><span style="font-family: Arial;"><o:p> </o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><b style=""><span style="font-size: 14pt; font-family: Arial;"><span style=""> </span></span></b><span style="font-size: 11pt; font-family: Arial;">The term “whatchamacallit” is the shortcut for the question, “What do you call it ?”<span style=""> </span>It is the question that is often asked by a reader when he comes across strange or obscure legal words, phrases and terms that he has never seen before because they are not usually contained in law books, dictionaries, textbooks or other legal literature or even if contained they are rarely given any attention.<span style=""> </span>This is specially true for certain terms in international law where their meaning is different from ordinary usage.<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 11pt; font-family: Arial;"><span style=""> </span><b style="">‘LEGAL WHATCHAMACALLIT”</b> is composed of Latin words and maxims, old English words and terms, the short titles given to certain legal doctrines that evolved either from legislation, usage, or doctrinal rulings of various courts, words, phrases and sentences in foreign languages, such as Spanish, French, Italian, etc. Also included are some common terms which are usually misinterpreted as to their meanings as well as some abbreviations.<span style=""> </span>The main purpose of this work is to remove the heavy cloud created by obscure, arcane and pompous words and terms which sometimes result to misinterpretations and ultimately injustice.<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 11pt; font-family: Arial;"><span style=""> </span>While this compilation is secondarily prepared for its “novelty” value and may be referred to when answering the so-called “crazy” questions, whether in the classroom or in the Bar examination, the entries may find their way in formal pleadings or memoranda because some of them were culled from jurisprudential doctrines, or statutory definitions.<span style=""> </span>Otherwise it has no practical value, except for entertainment purposes, for the use of<span style=""> </span>“pedants.” and lay persons who are curious to find out the legal meaning of certain concepts and <o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 11pt; font-family: Arial;"><span style=""> </span><o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 11pt; font-family: Arial;"><span style=""> </span>The <b style="">PRiMUS </b>Board of Consultants determine what shall be included in this work and the entries shall be updated from time to time. Howver, it shall be appreciated if suggestions are made for possible inclusion in this work. <o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 11pt; font-family: Arial;"><o:p> </o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 11pt; font-family: Arial;"><span style=""> </span>Although available for the free use of all,<span style=""> </span>the contents of the </span><span style="font-size: 11pt; font-family: Arial;">“<b style="">LEGAL WHATCHAMACALLIT</b>” </span><span style="font-size: 11pt; font-family: Arial;">are covered by copyright protection and should never be published (whether through printed media or through the internet) without written permission in writing from<span style=""> </span><b style="">PRIMUS </b>Information Center, Inc.<u><o:p></o:p></u></span></p> <p class="MsoNormal" style="text-align: justify;"><u><span style="font-size: 11pt; font-family: Arial;"><o:p><span style="text-decoration: none;"> </span></o:p></span></u></p> <p class="MsoNormal" style="text-align: justify;"><b style=""><span style="font-size: 36pt; font-family: "Old English Text MT";">A<span style=""> </span></span></b><span style="font-size: 11pt; font-family: "Old English Text MT";"><o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 11pt; font-family: "Old English Text MT";"><o:p> </o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 11pt; font-family: "Old English Text MT";"><span style=""> </span></span><b style=""><i style=""><span style="font-size: 12pt; font-family: Arial;">A.</span></i></b><b style=""><span style="font-size: 11pt; font-family: Arial;"><span style=""> </span><span style=""> </span></span></b><span style="font-size: 11pt; font-family: Arial;">This an abbreviation of<span style=""> </span>the Roman word, <i style="">absolvo, </i>which means to absolve or to acquit from criminal liability.<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 11pt; font-family: Arial;"><o:p> </o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 12pt; font-family: Arial;"><span style=""> </span><b style=""><i style="">AB INITIO.<span style=""> </span></i></b></span><b style=""><i style=""><span style="font-size: 11pt; font-family: Arial;"> </span></i></b><span style="font-size: 11pt; font-family: Arial;">A term that means “from the beginning,” at first.” or “from the inception.”<span style=""> </span></span><span style="font-family: Arial;">[<i style="">Camid v. Office of the President, </i>448 SCRA 711 (2005)]</span><span style="font-size: 11pt; font-family: Arial;">.<span style=""> </span><o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 11pt; font-family: Arial;"><span style=""> </span>For example, a marriage that is void <i style="">ab initio </i>is void from the beginning.<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 11pt; font-family: Arial;"><o:p> </o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 11pt; font-family: Arial;"><span style=""> </span><o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 12pt; font-family: Arial;"><span style=""> </span><b style=""><i style="">ACCION PUBLICIANA.<span style=""> </span></i></b></span><span style="font-size: 11pt; font-family: Arial;">This is</span><span style="font-size: 12pt; font-family: Arial;"> </span><span style="font-size: 11pt; font-family: Arial;">a suit for the recovery of possession of the right to possess.<span style=""> </span>Another term for it is an ejectment suit filed after the expiration of one year after the occurrence of the cause of action or from the unlawful withholding of possession of the realty.<span style=""> </span><span style=""> </span></span><span style="font-family: Arial;">(<i style="">Hilario v. </i></span><st1:city><st1:place><i style=""><span style="font-family: Arial;">Salvador</span></i></st1:place></st1:city><i style=""><span style="font-family: Arial;">, </span></i><span style="font-family: Arial;">457 SCRA 815)<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-family: Arial;"><o:p> </o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 12pt; font-family: Arial;"><span style=""> </span><b style=""><i style="">ACCION REINVINDICATORIA.</i></b><span style=""> </span></span><span style="font-size: 11pt; font-family: Arial;">This is a suit which has for its object the recovery of possession over the real property as an owner.<span style=""> </span></span><span style="font-family: Arial;">(<i style="">Hilario v. </i></span><st1:city><st1:place><i style=""><span style="font-family: Arial;">Salvador</span></i></st1:place></st1:city><i style=""><span style="font-family: Arial;">, </span></i><span style="font-family: Arial;">457 SCRA 815)<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-family: Arial;"><o:p> </o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-family: Arial;"><span style=""> </span></span><b style=""><i style=""><span style="font-size: 12pt; font-family: Arial;">A COELO USQUE AD CENTRUM.<span style=""> </span></span></i></b><span style="font-size: 11pt; font-family: Arial;"><span style=""> </span>From the heavens to the center of the earth.<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-family: Arial;"><o:p> </o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 11pt; font-family: Arial;"><span style=""> </span></span><b style=""><i style=""><span style="font-size: 12pt; font-family: Arial;" lang="FR">AGREMENT</span></i></b><b style=""><i style=""><span style="font-size: 12pt; font-family: Arial;">.<span style=""> </span></span></i></b><span style="font-size: 11pt; font-family: Arial;">An indication by the receiving State of the acceptability of the person of a diplomatic envoy who is proposed to be appointed by another country.<span style=""> </span>This is to ensure that the diplomatic envoy that is sent to represent his country is not a <i style="">persona non grata </i>to the receiving State.</span><span style="font-size: 11pt; font-family: Arial;" lang="FR"><o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-family: Arial;"><o:p> </o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 12pt; font-family: Arial;"><span style=""> </span><b style=""><i style="">AIDE-MEMOIRE.<span style=""> </span></i></b></span><span style="font-size: 11pt; font-family: Arial;">A diplomatic correspondence consisting of a brief summary of oral representations made. <o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-family: Arial;"><o:p> </o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 11pt; font-family: Arial;"><span style=""> </span></span><b style=""><span style="font-size: 12pt; font-family: Arial;">ATTENTAT CLAUSE.<span style=""> </span></span></b><span style="font-size: 11pt; font-family: Arial;">This is a provision in an extradition treaty which provides that the assassination of the head of a foreign government or any member his family should not be considered as a political offense, hence extraditable.<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-family: Arial;"><o:p> </o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 11pt; font-family: Arial;"><span style=""> </span></span><b style=""><span style="font-size: 12pt; font-family: Arial;">AUTO-LIMITATION.<span style=""> </span></span></b><span style="font-size: 11pt; font-family: Arial;">The State gives its consent, express or implied, to submit to a restriction of its sovereign rights.<span style=""> </span></span><span style="font-family: Arial;">(<i style="">Reagan v. Commissioner of Internal Revenue, </i>G.R. No. L-26379, </span><st1:date year="1969" day="27" month="12"><span style="font-family: Arial;">December 27, 1969</span></st1:date><span style="font-family: Arial;">)</span><b style=""><i style=""><span style="font-size: 11pt; font-family: Arial;"><o:p></o:p></span></i></b></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 11pt; font-family: Arial;"><o:p> </o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><b style=""><span style="font-size: 36pt; font-family: "Old English Text MT";">B </span></b><b style=""><span style="font-size: 11pt; font-family: "Old English Text MT";"><o:p></o:p></span></b></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-family: Arial;"><o:p> </o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 12pt; font-family: Arial;"><span style=""> </span><b style="">BELIEF - ACTION DISTINCTION.<span style=""> </span></b></span><span style="font-size: 11pt; font-family: Arial;">This a distinction of the concepts of what may properly fall within the constitution protection of freedom of religion. In <i style="">Cantwell v. Connecticut, </i>310 U.S. 296 (1940), Justice Roberts the two concepts – freedom to believe and freedom to act.<span style=""> </span>The first is absolute, but in the nature of things, the second cannot be.<span style=""> </span><o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 11pt; font-family: Arial;"><span style=""> </span>The power to regulate must be so exercised so that in attaining a permissible end there must be no undue infringement of the protected freedom to believe.<span style=""> </span>Hence, the freedom to act may be the subject of regulation.<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-family: Arial;"><o:p> </o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><b style=""><span style="font-size: 12pt; font-family: Arial;"><span style=""> </span>BLOCKADE.</span></b><span style="font-size: 12pt; font-family: Arial;"><span style=""> </span></span><span style="font-size: 11pt; font-family: Arial;">In international law, this </span><span style="font-size: 11pt; font-family: Arial;">is a naval operation, usually composed of a flotilla of vessels, which seeks to prevent entrance to the ports of the offending State of properties destined therefor, particularly vessels.<span style=""> </span>There are two kinds of blockade:<span style=""> </span>Hostile blockade and pacific blockade.<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 11pt; font-family: Arial;"><span style=""> </span>Refer to HOSTILE BLOCKADE; PACIFIC BLOCKADE</span><span style="font-family: Arial;"><span style=""> </span><o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-family: Arial;"><o:p> </o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><b style=""><span style="font-size: 12pt; font-family: Arial;"><span style=""> </span>BLUE-SKY BARGAINING</span></b><span style="font-size: 11pt; font-family: Arial;">.<span style=""> </span>In collective bargaining negotiations, the term means making exaggerated or unreasonable proposals. .<span style=""> </span>“Blue-sky bargaining” is indicative of violation of duty to bargain collectively. </span><span style="font-family: Arial;">[<i style="">Standard Chartered Bank Employees </i></span><st1:place><i style=""><span style="font-family: Arial;">Union</span></i></st1:place><i style=""><span style="font-family: Arial;"> (NUBE) v. Confesor, et al.,</span></i><span style="font-family: Arial;"> G. R. No. 114974, </span><st1:date year="2004" day="16" month="6"><span style="font-family: Arial;">June 16, 2004</span></st1:date><span style="font-family: Arial;"> citing Arthur A. Sloane and Fred Witney, Labor Relations, 7th Edition, 1991, p. 195]<b style=""><o:p></o:p></b></span></p> <p class="MsoNormal" style="text-align: justify;"><b style=""><span style="font-family: Arial;"><o:p> </o:p></span></b></p> <p class="MsoNormal" style="text-align: justify;"><b style=""><span style="font-size: 12pt; font-family: Arial;"><span style=""> </span>BOYCOTT.</span></b><b style=""><span style="font-size: 11pt; font-family: Arial;"><span style=""> </span></span></b><span style="font-size: 11pt; font-family: Arial;">This is a suspension, by the nationals of one State, of trade relations with nationals of another State.<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><b style=""><span style="font-family: Arial;"><o:p> </o:p></span></b></p> <p class="MsoNormal" style="text-align: justify;"><b style=""><span style="font-size: 12pt; font-family: Arial;"><span style=""> </span>BRICKER AMENDMENT.</span></b><span style="font-size: 12pt; font-family: Arial;"><span style=""> </span></span><span style="font-size: 11pt; font-family: Arial;">This was a controversial proposal for constitutional amendments made sometime in 1953 by then Senator Bricker of the U.S. Senate Judiciary Committee to include “A provision of a treaty which conflicts with this Constitution shall have no force and effect,” and another proposal which states, “A treaty shall become effective as an internal law in the United States only through legislation which would be valid in the absence of treaty.”<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 11pt; font-family: Arial;"><span style=""> </span>A substitute by Senator George provided, “A provision of a treaty or other international agreement which conflicts with this Constitution shall not be of any force or effect.”<span style=""> </span><o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 11pt; font-family: Arial;"><span style=""> </span>The proposed Bricker amendment and the George substitute were in response to the concerns raised by various sectors as a result of the decision in the case of <i style="">Missouri v. Holland, </i>252 U.S. 116, 40 S.Ct., 64 L. Ed. 641 (1929) that any and all constitutional limitations could be overridden via the international agreement route.<span style=""> </span>Both proposals however <span style=""> </span>did not obtain the required two-thirds vote for the amendment of the U.S. Constitution.<span style=""> </span>In the meantime, the U.S. Supreme Court in <i style="">Reid v. Covert, </i>354 U.S. 1 (1957) had occasion to state that, “no agreement with a foreign nation can confer power on the Congress, or on any other branch of Government, which is free from the restraints of the Constitution.”<span style=""> </span><o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 11pt; font-family: Arial;"><span style=""> </span>The reader should take time to compare the above comments with the incorporation clause of the 1987 Philippine Constitution to the effect that, “The Philippines renounces war as an instrument of national policy, adopts the generally accepted principles of internal law as part of the law of the land and adheres to the policy of peace, equality, justice, freedom, cooperation, and amity with all nations.”<span style=""> </span></span><span style="font-family: Arial;">(Art. II, Sec. 2)<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><b style=""><span style="font-family: Arial;"><o:p> </o:p></span></b></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 12pt; font-family: Arial;"><span style=""> </span><b style="">BYSTANDER RULE.</b></span><span style="font-size: 11pt; font-family: Arial;"><span style=""> </span>Under the bystander rule in all cases of certification elections, whether the petition for certification election is filed by an employer or a legitimate labor organization, the employer shall not be considered a party thereto with a concomitant right to oppose a petition for certification election. <o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 11pt; font-family: Arial;"><span style=""> </span>The employer’s participation in such proceedings shall be limited <span style="">to </span>being notified or informed of petitions of such nature; and submitting the list of employees during the pre-election conference should the Med-Arbiter act favorably on the petition</span><span style="font-family: Arial;">.<span style=""> </span>(Labor Code, Art. 258-A, <span style=""> </span>as inserted by R.A. No. 9481)</span><span style="font-size: 11pt; font-family: Arial;"><o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 11pt; font-family: Arial;"><o:p> </o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><b style=""><span style="font-size: 36pt; font-family: "Old English Text MT";">C<o:p></o:p></span></b></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-family: Arial;"><o:p> </o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 11pt; font-family: Arial;"><span style=""> </span></span><b style=""><span style="font-size: 12pt; font-family: Arial;">CALLING-OUT POWER. <span style=""> </span></span></b><span style="font-size: 11pt; font-family: Arial;">Under the</span><span style="font-size: 12pt; font-family: Arial;"> </span><span style="font-size: 11pt; font-family: Arial;">“Calling-out Power” of the President under Section 18, Article VII of the Constitution,<i style=""> </i>the President of the Philippines shall be the Commander-in-Chief of all armed forces of the Philippines and whenever it becomes necessary, he may call out such armed forces to prevent or suppress lawless violence, invasion or rebellion. </span><span style="font-family: Arial;">(Art. VII, Sec. 18, 1<sup>st</sup> par., 1<sup>st</sup> sentence,)</span><b style=""><span style="font-size: 12pt; font-family: Arial;"><o:p></o:p></span></b></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-family: Arial;"><o:p> </o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><b style=""><span style="font-size: 12pt; font-family: Arial;"><span style=""> </span>CALVO CLAUSE.<span style=""> </span></span></b><span style="font-size: 11pt; font-family: Arial;">A clause, suggested by the 19<sup>th</sup> century Argentinean diplomat Dr. Carlos Calvo, that should be incorporated in public contracts with aliens that disputes arising from the contract shall be settled solely by local remedies.<span style=""> </span>In short, aliens who enter into contractual obligations with nationals of a host State should be treated in the same manner as nationals with regard to remedies for breach of contractual obligations.<span style=""> </span>The aliens waive their right seeking recourse to their home State for the resolution of their claims under the contract.<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-family: Arial;"><o:p> </o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><b style=""><span style="font-size: 12pt; font-family: Arial;"><span style=""> </span>CALVO DOCTRINE.<span style=""> </span></span></b><span style="font-size: 11pt; font-family: Arial;">This was evolved by Dr. Carlos Calvo, a 19<sup>th</sup> century Argentinean diplomat, to the effect that a legitimate government shall not be held responsible for losses suffered as a result of insurrection or civil war unless it has failed to exercise due diligence in preventing or suppressing the revolution,<span style=""> </span></span><span style="font-family: Arial;">[<i style="">United States v. El Salvador, </i>Arbitral Tribunal, 1902 (U.S. Foreign Relations 876 (1902)]<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-family: Arial;"><o:p> </o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 12pt; font-family: Arial;"><span style=""> </span><b style="">CARTEL.<span style=""> </span></b></span><span style="font-size: 11pt; font-family: Arial;">In international law, this is an agreement for non-belligerent intercourse between belligerents in time of war.<span style=""> </span>The agreement usually concerns the exchange and treatment of prisoners.<span style=""> </span></span><span style="font-family: Arial;">(Paras citing Wilson, Handbook of International Law, p. 413)<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 11pt; font-family: Arial;"><span style=""> </span>In its ordinary sense, it refers to a group of participants in an industry who band together for their protection, setting and controlling the price of goods or services, the quantity to be produced or released in the market or both. </span><span style="font-family: Arial;"><o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-family: Arial;"><o:p> </o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 12pt; font-family: Arial;"><span style=""> </span><b style="">CARTEL SHIPS.<span style=""> </span></b></span><span style="font-size: 11pt; font-family: Arial;">These are the vessels used to carry out the cartel agreements, particularly those used for carrying prisoners of war to be exchanged for other prisoners of war.<span style=""> </span></span><span style="font-family: Arial;">(Paras citing Wilson, Handbook of International Law, p. 413)<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 11pt; font-family: Arial;"><o:p> </o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><b style=""><span style="font-size: 12pt; font-family: Arial;"><span style=""> </span>CIVIL EMBARGO.<span style=""> </span></span></b><span style="font-size: 11pt; font-family: Arial;">Another name for pacific embargo.<span style=""> </span>Refer to PACIFIC EMBARGO.<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-family: Arial;"><o:p> </o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 12pt; font-family: Arial;"><span style=""> </span><b style="">COMPELLING INTEREST or STRICT SCRUTINY TEST.<span style=""> </span></b></span><span style="font-size: 11pt; font-family: Arial;">Refer to STRICT SCRUTINY OR COMPELLING INTEREST TEST<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-family: Arial;"><o:p> </o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 12pt; font-family: Arial;"><span style=""> </span><b style="">COMMON HERITAGE OF MANKIND.<span style=""> </span></b></span><span style="font-size: 11pt; font-family: Arial;">This is the description that is given to the international area of the sea-bed and its resources and thus, “shall not be subject to appropriation by any means by States or persons,” such area being open to peaceful uses by all States without discrimination, and its exploration and exploitation “shall be carried out for the benefit of mankind as a whole.”<span style=""> </span></span><span style="font-family: Arial;">[U. N. General Assembly Res. 2749 (XXV) (1970), The Declaration of Principles Governing the Sea-Bed and Ocean Floor and the Subsoil Thereof Beyond the Limits of National Jurisdiction]<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-family: Arial;"><o:p> </o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-family: Arial;"><span style=""> </span></span><b style=""><i style=""><span style="font-size: 12pt; font-family: Arial;">COMPENSACION.</span></i></b><span style="font-size: 12pt; font-family: Arial;"><span style=""> </span></span><span style="font-size: 11pt; font-family: Arial;">This is also known as set-off which is a money demand by the defendant against the plaintiff arising upon contract and constituting a debt independent of and unconnected with the cause of actions set forth in the complaint, and may be used to offset a plaintiff’s claim but not to recover affirmatively.<span style=""> </span></span><span style="font-family: Arial;">(<i style="">Korea Exchange Bank v. Gonzales, </i>456 SCRA 224)<o:p></o:p></span></p><p class="MsoNormal" style="text-align: justify;"><span style="font-family: Arial;"><o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-family: Arial;"><o:p> </o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 11pt; font-family: Arial;"><span style=""> </span></span><b style=""><span style="font-size: 12pt; font-family: Arial;">CONSTRUCTIVE TRUST.</span></b><span style="font-size: 12pt; font-family: Arial;"><span style=""> </span></span><span style="font-size: 11pt; font-family: Arial;">A trust that is created, not by any word evincing a direct intention to create a trust, but by operation of law in order to satisfy the demands of justice and to prevent unjust enrichment.<span style=""> </span></span><span style="font-family: Arial;">(<i style="">Bejoc v. Cabreros, </i>464 SCRA 78)<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-family: Arial;"><o:p> </o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 12pt; font-family: Arial;"><span style=""> </span><b style="">COURT-PACKING PLAN.<span style=""> </span></b></span><span style="font-size: 11pt; font-family: Arial;">This was the attempt on the part of the </span><st1:place><span style="font-size: 11pt; font-family: Arial;">Roosevelt</span></st1:place><span style="font-size: 11pt; font-family: Arial;"> administration to reform the courts as a result of various reverses it suffered in the U.S. Supreme Court.<span style=""> </span>The so-called “court-packing plan” failed.<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 11pt; font-family: Arial;"><span style=""> </span>From the colloquial point of view, “court-packing” may an action undertaken by an administration to appoint “friendly” magistrates who would rule in favour of the administration.<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 11pt; font-family: Arial;"><o:p> </o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 12pt; font-family: Arial;"><span style=""> </span><b style="">CRONYISM </b></span><span style="font-family: Arial;"><span style=""> </span></span><span style="font-size: 11pt; font-family: Arial;">which involves unduly favoring a crony to the prejudice of public interest is a form of violation of the oath of office which constitute betrayal of the public trust.<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 11pt; font-family: Arial;"><o:p> </o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><b style=""><span style="font-size: 36pt; font-family: "Old English Text MT";">D<o:p></o:p></span></b></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 11pt; font-family: Arial;"><o:p> </o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 11pt; font-family: Arial;"><o:p> </o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 11pt; font-family: Arial;"><span style=""> </span></span><b style=""><span style="font-size: 12pt; font-family: Arial;">DERIVATIVE CITZENSHIP.<span style=""> </span></span></b><span style="font-size: 11pt; font-family: Arial;">Derivative Citizenship under Rep. Act No. 9225, <i style="">the </i>Citizenship Retention and Re-Acquisition Act of 2003 provides that the unmarried child, whether legitimate, illegitimate or adopted, below eighteen (18) years of age, of those who re-acquire Philippine citizenship under this Act shall be deemed citizens of the </span><st1:country-region><st1:place><span style="font-size: 11pt; font-family: Arial;">Philippines</span></st1:place></st1:country-region><span style="font-size: 11pt; font-family: Arial;">.</span><span style="font-family: Arial;"><span style=""> </span>(Sec. 4, Rep. Act No. 9225)<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 11pt; font-family: Arial;"><o:p> </o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 12pt; font-family: Arial;"><span style=""> </span><b style="">DOUBLE <span style=""> </span>CRIMINALITY.<span style=""> </span></b></span><span style="font-size: 11pt; font-family: Arial;">Under this principle, extradition is available only when the act is an offense in the two countries involved in extradition.<span style=""> </span></span><span style="font-family: Arial;">(Cruz, International Law, 2003 ed., p. 205; Coquia and Santiago, International Law and World Organizations, 2005 ed., p. 342)</span><span style="font-size: 11pt; font-family: Arial;"><o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 11pt; font-family: Arial;"><span style=""> </span><span style=""> </span>It is intended to ensure each state that it can rely on reciprocal treatment and that no state will use its processes to surrender a person for contract which it does not characterize as criminal.<span style=""> </span></span><span style="font-family: Arial;">(Bassiouni, International Extradition, 4<sup>th</sup> ed., p. 467)<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 11pt; font-family: Arial;"><span style=""> </span>The requirement of double criminality is satisfied even if the act was not punishable in the requested state at the time of its occurrence if it was criminal at the time the request was made.<span style=""> </span></span><span style="font-family: Arial;">(<i style="">Ibid., </i>p. 469)<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 11pt; font-family: Arial;"><o:p> </o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><b style=""><span style="font-size: 36pt; font-family: "Old English Text MT";">E<o:p></o:p></span></b></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-family: Arial;"><o:p> </o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 11pt; font-family: Arial;"><span style=""> </span><o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-family: Arial;"><o:p> </o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><b style=""><span style="font-size: 12pt; font-family: Arial;"><span style=""> </span>EMBARGO </span></b><span style="font-size: 11pt; font-family: Arial;">is the forcible detention of properties, usually vessels or aircraft, in one’s country with the end in view of preventing their going to another state.<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 11pt; font-family: Arial;"><span style=""> </span>It may be a general embargo in the sense that it consists in the sequestration of the public or private property of an offending state.<span style=""> </span></span><span style="font-family: Arial;">[Wilson, Handbook of International Law, (1939), p.229]<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 11pt; font-family: Arial;"><span style=""> </span>It may be a pacific embargo or a hostile embargo.<span style=""> </span></span><span style="font-family: Arial;">(Fenwick, International Law, p. 433)<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><b style=""><span style="font-size: 12pt; font-family: Arial;"><span style=""> </span></span></b><span style="font-size: 11pt; font-family: Arial;">Refer to HOSTILE EMBARGO; PACIFIC EMBARGO<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-family: Arial;"><o:p> </o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 12pt; font-family: Arial;"><span style=""> </span><b style=""><i style="">ESTRADA </i>DOCTRINE.<span style=""> </span></b></span><span style="font-size: 11pt; font-family: Arial;">This is a doctrine promoted by the then Secretary of Foreign Relations of Mexico Genaro Estrada to the effect that a state should not apply subjective considerations to extending recognition of a new government, but rather accept the existence of that government.<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 11pt; font-family: Arial;"><span style=""> </span>This is also known as the doctrine of effectiveness because it holds that the only test for recognition should be whether or not the government is in effective control of the machinery of state and the government.<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-family: Arial;"><o:p> </o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 12pt; font-family: Arial;"><span style=""> </span><b style="">EXEQUATOR.<span style=""> </span></b></span><b style=""><span style="font-size: 11pt; font-family: Arial;">1952-7d</span></b><span style="font-size: 12pt; font-family: Arial;"><span style=""> </span></span><span style="font-family: Arial;"><o:p></o:p></span></p><p class="MsoNormal" style="text-align: justify;"><span style="font-size: 11pt; font-family: Arial;"><o:p> </o:p></span></p><p class="MsoNormal" style="text-align: justify;"><span style="font-size: 11pt; font-family: Arial;"><o:p>
<br /></o:p></span></p><p class="MsoNormal" style="text-align: justify;"><b style=""><span style="font-size: 36pt; font-family: "Old English Text MT";">F<o:p></o:p></span></b></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-family: Arial;"><o:p> </o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 12pt; font-family: Arial;"><span style=""> </span><b style="">FAIR COMMENT </b></span><span style="font-size: 11pt; font-family: Arial;">states that fair commentaries on matters of public interest are privileged and constitute a valid defense in an action for libel or slander.<span style=""> </span><o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 11pt; font-family: Arial;"><span style=""> </span>It means that while in general every discreditable imputations publicly made is deemed false, because every man is presumed innocent until his guilt is judicially proved, and every false imputation is deemed to be malicious, nevertheless, when the discreditable imputation is made against a public person in his official capacity, it is not necessarily actionable.<span style=""> </span><o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 11pt; font-family: Arial;"><span style=""> </span>In order that such discreditable imputation to a public official may be actionable, it must either be a false allegation of fact or a comment based on a false supposition.<span style=""> </span>If the comment is an expression of opinion, based on established facts, then it is immaterial that the opinion happens to be mistaken, so long as it might reasonably be inferred from the facts.”</span><span style="font-family: Arial;"><span style=""> </span>[<i style="">Filipinas Broadcasting Network Inc. v. Ago Medical and </i></span><st1:place><st1:placename><i style=""><span style="font-family: Arial;">Educational</span></i></st1:placename><i style=""><span style="font-family: Arial;"> </span></i><st1:placetype><i style=""><span style="font-family: Arial;">Center</span></i></st1:placetype><i style=""><span style="font-family: Arial;"> </span></i><st1:placename><i style=""><span style="font-family: Arial;">Bicol</span></i></st1:placename><i style=""><span style="font-family: Arial;"> </span></i><st1:placename><i style=""><span style="font-family: Arial;">Christian</span></i></st1:placename><i style=""><span style="font-family: Arial;"> </span></i><st1:placename><i style=""><span style="font-family: Arial;">College</span></i></st1:placename></st1:place><i style=""><span style="font-family: Arial;"> of Medicine (AMEC-BCCM), et al., </span></i><span style="font-family: Arial;">G.R. Mo. 141994, </span><st1:date year="2005" day="17" month="1"><span style="font-family: Arial;">January 17, 2005</span></st1:date><span style="font-family: Arial;"> citing <i style="">Borjal v. Court of Appe</i></span><span style="font-size: 11pt; font-family: Arial;"><o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 11pt; font-family: Arial;"><o:p> </o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><b style=""><span style="font-size: 11pt; font-family: Arial;"><span style=""> </span>“</span></b><b style=""><span style="font-size: 12pt; font-family: Arial;">FILIPINO FIRST” POLICY or “PREFERENTIAL US” CONCEPT.<span style=""> </span></span></b><span style="font-size: 11pt; font-family: Arial;">The State shall promote the preferential use of Filipino labor, domestic materials and locally produced goods, and adopt measures that help make them competitive.<span style=""> </span></span><span style="font-family: Arial;">(Sec. 12,<span style=""> </span>Article XII, 1987 Constitution)</span><span style="font-size: 11pt; font-family: Arial;"><o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-family: Arial;"><o:p> </o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 12pt; font-family: Arial;"><span style=""> </span><b style=""><i style=""><span style="">
<br /></span></i></b></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-family: Arial;"><o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 11pt; font-family: Arial;"><o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 11pt; font-family: Arial;"><o:p> </o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><b style=""><span style="font-size: 36pt; font-family: "Old English Text MT";">G<o:p></o:p></span></b></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-family: Arial;"><o:p> </o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 12pt; font-family: Arial;"><span style=""> </span><b style="">GENERAL ACT.<span style=""> </span></b></span><span style="font-size: 11pt; font-family: Arial;">Another term for final act or <i style="">protocol de cloture.<span style=""> </span><o:p></o:p></i></span></p> <p class="MsoNormal" style="text-align: justify;"><i style=""><span style="font-size: 11pt; font-family: Arial;"><span style=""> </span></span></i><span style="font-size: 11pt; font-family: Arial;">Refer to FINAL ACT.<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-family: Arial;"><o:p> </o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><b style=""><span style="font-size: 12pt; font-family: Arial;"><span style=""> </span>GENOCIDE </span></b><span style="font-size: 11pt; font-family: Arial;">means any of the following acts committed with intent to destroy, in whole or in part, a national, ethnical, racial or religious group such as:<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 11pt; font-family: Arial;"><span style=""> </span>a.<span style=""> </span>Killing members of the group;<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 11pt; font-family: Arial;"><span style=""> </span>b.<span style=""> </span>Causing serious bodily or mental harm to members of the group;<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 11pt; font-family: Arial;"><span style=""> </span>c.<span style=""> </span>Deliberately inflicting on the group conditions of life calculated to bring about its physical destruction in whole or in part;<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 11pt; font-family: Arial;"><span style=""> </span>d.<span style=""> </span>Imposing measures intended to prevent births within groups; and<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 11pt; font-family: Arial;"><span style=""> </span>e.<span style=""> </span>Forcibly transferring children of the group to another group.<span style=""> </span></span><span style="font-family: Arial;">(Rome Statute adopted by the United Nations Diplomatic Conference of Plenipotentiaries on 17 July 1998, Art. 6)<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><b style=""><span style="font-size: 36pt; font-family: "Old English Text MT";">H<o:p></o:p></span></b></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-family: Arial;"><o:p> </o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><b style=""><span style="font-size: 12pt; font-family: Arial;"><span style=""> </span>HOSTILE BLOCKADE.<span style=""> </span></span></b><span style="font-size: 11pt; font-family: Arial;">This is a naval operation where one country that is at war with another prevent the entry of vessels and/or goods into the port of the other. <o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 11pt; font-family: Arial;"><span style=""> </span>Compared with a pacific blockade the flotilla of vessels that enforce the blockade may be situated even within the territorial sea of the state that is blockade.<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-family: Arial;"><o:p> </o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><b style=""><span style="font-size: 12pt; font-family: Arial;"><span style=""> </span>HOSTILE<span style=""> </span>EMBARGO</span></b><b style=""><span style="font-size: 11pt; font-family: Arial;"> </span></b><span style="font-size: 11pt; font-family: Arial;">is an instance where the properties, vessels and aircrafts detained are of the state with which the detaining state is in conflict.<span style=""> </span></span><span style="font-family: Arial;">(Fenwick, International Law, p. 435)<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 11pt; font-family: Arial;"><o:p> </o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><b style=""><span style="font-size: 36pt; font-family: "Old English Text MT";">I<o:p></o:p></span></b></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-family: Arial;"><o:p> </o:p></span></p><p class="MsoNormal" style="text-align: justify;"><span style="font-size: 11pt; font-family: Arial;"><o:p> </o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 12pt; font-family: Arial;"><span style=""> </span><b style="">INTERMEDIATE LEVEL OF SCRUTINY TEST or QUASI-SUSPECT CLASS.<span style=""> </span></b></span><span style="font-size: 11pt; font-family: Arial;">The intermediate level of scrutiny (or quasi-suspect class) test.<span style=""> </span>Classification based on gender or legitimacy are not “suspect,” but neither are they judged by the traditional or rational basis test.<span style=""> </span>Intentional discriminations against members of a quasi-suspect class violate equal protection unless they are substantially related to important government objectives. </span><span style="font-family: Arial;"><span style=""> </span><i style="">(Craig v. Boren, </i>429 </span><st1:country-region><st1:place><span style="font-family: Arial;">U.S.</span></st1:place></st1:country-region><span style="font-family: Arial;"> 190<i style="">)</i><span style=""> </span></span><span style="font-size: 11pt; font-family: Arial;">Thus, a state law granting a property tax exemption to widows, but not widowers, has been held valid for it furthers the state policy of cushioning the financial impact of spousal loss upon the sex for whom that loss usually impo</span><span style="font-size: 12pt; font-family: Arial;"><o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 11pt; font-family: Arial;"><o:p> </o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 11pt; font-family: Arial;"><o:p> </o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><b style=""><span style="font-size: 36pt; font-family: "Old English Text MT";">J<o:p></o:p></span></b></p> <p class="MsoNormal" style="text-align: justify;"><b style=""><i style=""><span style="font-family: Arial;"><o:p> </o:p></span></i></b></p> <p class="MsoNormal" style="text-align: justify;"><b style=""><i style=""><span style="font-family: Arial;"><span style=""> </span></span></i></b><b style=""><i style=""><span style="font-size: 12pt; font-family: Arial;">JURE GESTIONIS</span></i></b><b style=""><i style=""><span style="font-size: 11pt; font-family: Arial;">.<span style=""> </span></span></i></b><span style="font-size: 11pt; font-family: Arial;">A </span><span style="font-size: 11pt; font-family: Arial;">state’s private, commercial and proprietary acts which are not immune from suit.</span><span style="font-family: Arial;"><span style=""> </span><span style=""> </span>(</span><st1:country-region><st1:place><i style=""><span style="font-family: Arial;">United States</span></i></st1:place></st1:country-region><i style=""><span style="font-family: Arial;"> v. Ruiz, </span></i><span style="font-family: Arial;">136 SCRA 487, 490-491)</span><b style=""><span style="font-size: 36pt; font-family: "Old English Text MT";"><o:p></o:p></span></b></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-family: Arial;"><o:p> </o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 11pt; font-family: Arial;"><span style=""> </span></span><b style=""><i style=""><span style="font-size: 12pt; font-family: Arial;">JURE IMPERII.<span style=""> </span></span></i></b><span style="font-size: 11pt; font-family: Arial;">The sovereign and government acts which is covered by the principle of state immunity from suit.</span><span style="font-family: Arial;"><span style=""> </span>(</span><st1:country-region><st1:place><i style=""><span style="font-family: Arial;">United States</span></i></st1:place></st1:country-region><i style=""><span style="font-family: Arial;"> v. Ruiz, </span></i><span style="font-family: Arial;">136 SCRA 487, 490-491)<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 11pt; font-family: Arial;"><span style=""> </span></span><span style="font-size: 11pt; font-family: Arial;">Establishment and maintenance of a diplomatic mission is an act <i style="">jure imperii.</i><span style=""> </span>Thus, the state of </span><st1:country-region><st1:place><span style="font-size: 11pt; font-family: Arial;">Indonesia</span></st1:place></st1:country-region><span style="font-size: 11pt; font-family: Arial;"> may not be sued for acting in such sovereign activity when it entered into a contract for the upkeep or maintenance of air conditioning units, generator sets, electrical facilities, water heaters, and water pumps of the Indonesian Embassy and the official residence of the Indonesian ambassador.<span style=""> </span></span><span style="font-family: Arial;">(<i style="">The </i></span><st1:place><st1:placetype><i style=""><span style="font-family: Arial;">Republic</span></i></st1:placetype><i style=""><span style="font-family: Arial;"> of </span></i><st1:placename><i style=""><span style="font-family: Arial;">Indonesia</span></i></st1:placename></st1:place><i style=""><span style="font-family: Arial;">, et al., v. Vinzon, etc.</span></i><span style="font-family: Arial;"> G. R. No. 154705, </span><st1:date year="2003" day="26" month="6"><span style="font-family: Arial;">June 26, 2003</span></st1:date><span style="font-family: Arial;">) </span><span style="font-size: 11pt; font-family: Arial;"><o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-family: Arial;"><o:p> </o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 12pt; font-family: Arial;"><span style=""> </span><b style=""><i style="">JUS POSTLIMINI.<span style=""> </span></i></b></span><span style="font-size: 11pt; font-family: Arial;">Refer to POSTLIMINIUM<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 11pt; font-family: Arial;"><o:p> </o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 11pt; font-family: Arial;"><o:p> </o:p></span></p><span style="font-size: 11pt; font-family: Arial;"><o:p></o:p></span><span style="font-size: 11pt; font-family: Arial;"><o:p></o:p></span><span style="font-size: 11pt; font-family: Arial;"><o:p></o:p></span><span style="font-size: 11pt; font-family: Arial;"><o:p></o:p></span> <p class="MsoNormal" style="text-align: justify;"><b style=""><span style="font-size: 36pt; font-family: "Old English Text MT";">L<o:p></o:p></span></b></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 11pt; font-family: Arial;"><o:p> </o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 11pt; font-family: Arial;"><span style=""> </span></span><b style=""><i style=""><span style="font-size: 12pt; font-family: Arial;">LIS PENDENS.</span></i></b><span style="font-size: 12pt; font-family: Arial;"><span style=""> </span></span><span style="font-size: 11pt; font-family: Arial;">The term literally means a pending suit.<span style=""> </span></span><span style="font-family: Arial;">(<i style="">Heirs of Eugenio Lopez, Sr. v. Enriquez, </i>449 SCRA 173)<span style=""> </span></span><span style="font-size: 11pt; font-family: Arial;">It is usually an inscription on certificates of title on real property or on the registry of property itself to warn the general public that there is a pending litigation involving the property.<span style=""> </span>The buyer of a property with a notice of <i style="">lis pendens</i> buys that property subject to the outcome of the litigation.<span style=""> </span>If his seller prevails in the suit filed then he steps into the shoes of the seller and there would be no suit that may brought again involving the same issues raised in the suit in which the seller has prevailed.<span style=""> </span>Unfortunately, the same holds true if the seller loses, in which case the buyer also loses .<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 11pt; font-family: Arial;"><o:p> </o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 11pt; font-family: Arial;"><o:p> </o:p></span></p><span style="font-size: 11pt; font-family: Arial;"><o:p> </o:p></span> <p class="MsoNormal" style="text-align: justify;"><b style=""><span style="font-size: 36pt; font-family: "Old English Text MT";">M<o:p></o:p></span></b></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 11pt; font-family: Arial;"><o:p> </o:p></span></p> <p class="MsoNormal" style="text-align: justify; text-indent: 0.5in;"><b style=""><span style="font-size: 12pt; font-family: Arial;">MIRANDA RIGHTS.<span style=""> </span></span></b><span style="font-size: 11pt; font-family: Arial;">Any person under investigation for the commission of an offense shall have the right <o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify; text-indent: 0.5in;"><span style="font-size: 11pt; font-family: Arial;">a.<span style=""> </span><span style=""> </span>to be informed of his right to remain silent and <o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify; text-indent: 0.5in;"><span style="font-size: 11pt; font-family: Arial;">b.<span style=""> </span><span style=""> </span>to have competent and independent counsel preferably of his own choice.<span style=""> </span><o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify; text-indent: 0.5in;"><span style="font-size: 11pt; font-family: Arial;">c.<span style=""> </span><span style=""> </span>If the person cannot afford the services of counsel, he must be provided with one.<span style=""> </span>These rights cannot be waived except in writing and in the presence of counsel. <o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 11pt; font-family: Arial;"><span style=""> </span>Authoritative interpretations of the Miranda rule as embodied in the above Art. III, Sec. 12 (1) require, however, that the crucial question is whether the accused has effectively waived the effectuation of these rights.<span style=""> </span>Accused should be asked whether he was willing to testify even without the assistance of counsel.<span style=""> </span>If he was willing to testify only with the assistance of counsel, he should be asked if he has one.<span style=""> </span>If he said he wanted to have counsel but could not afford one, he should be asked if he wanted one appointed for him.<span style=""> </span>If these questions are not asked there is no effective waiver of the rights to remain silent and to counsel.<span style=""> </span></span><span style="font-family: Arial;">(<i style="">People v. Naag, et al.,</i> G.R. No. 123860, </span><st1:date year="2000" day="20" month="1"><span style="font-family: Arial;">January 20, 2000</span></st1:date><span style="font-family: Arial;">)<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><b style=""><span style="font-family: Arial;"><o:p> </o:p></span></b></p> <p class="MsoNormal" style="text-align: justify;"><b style=""><span style="font-size: 12pt; font-family: Arial;"><span style=""> </span></span></b></p><p class="MsoNormal" style="text-align: justify;"><b style=""><span style="font-size: 36pt; font-family: "Old English Text MT";">N<o:p></o:p></span></b></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 11pt; font-family: Arial;"><o:p> </o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 11pt; font-family: Arial;"><span style=""> </span></span><b style=""><span style="font-size: 12pt; font-family: Arial;">NEUTRAL REPORTAGE.</span></b><span style="font-size: 11pt; font-family: Arial;"><span style=""> </span>This is a principle in prosecutions for libel where a republisher who accurately and disinterestedly reports certain defamatory statements against public figures is shielded from liability, regardless of the republisher’s subjective awareness of the truth or falsity of the accusation.<span style=""> </span><o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 11pt; font-family: Arial;"><span style=""> </span>The privilege of neutral reportage applies where the defamed person is a public figure who is involved in an existing controversy, and a party to that controversy makes the defamatory statement.<span style=""> </span></span><span style="font-family: Arial;">[<i style="">Filipinas Broadcasting Network, Inc. v. Ago Medical and Educational </i></span><st1:place><st1:placename><i style=""><span style="font-family: Arial;">Center-Bicol</span></i></st1:placename><i style=""><span style="font-family: Arial;"> </span></i><st1:placename><i style=""><span style="font-family: Arial;">Christian</span></i></st1:placename><i style=""><span style="font-family: Arial;"> </span></i><st1:placename><i style=""><span style="font-family: Arial;">College</span></i></st1:placename></st1:place><i style=""><span style="font-family: Arial;"> of Medicine (AMEC-BCCM)), </span></i><span style="font-family: Arial;">448 SCRA 413; <i style="">Flor v. People, </i>454 SCRA 440]<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 11pt; font-family: Arial;"><o:p> </o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 12pt; font-family: Arial;"><span style=""> </span><b style=""><i style="">NOTATU DIGNUM.<span style=""> </span></i></b></span><span style="font-size: 11pt; font-family: Arial;">The presumption of regularity in the performance of a judge’s functions, hence bias, prejudice and even undue interest cannot be presumed, specially weighed against a judge’s sacred obligation under oath of office to administer justice without respect to any person and do equal right to the poor and to the rich.<span style=""> </span></span><span style="font-family: Arial;">[<i style="">Silverio, Jr. v. Filipino Business Consultants, Inc, </i>466 SCRA 584 (2005)]<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-family: Arial;"><o:p> </o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><b style=""><span style="font-size: 12pt; font-family: Arial;"><span style=""> </span><i style="">NOTE VERBALE.<span style=""> </span></i></span></b><span style="font-size: 11pt; font-family: Arial;">An unsigned document which contains a resume of diplomatic conversations.<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 11pt; font-family: Arial;"><o:p> </o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><b style=""><span style="font-size: 36pt; font-family: "Old English Text MT";">O<o:p></o:p></span></b></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 11pt; font-family: Arial;"><o:p> </o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 12pt; font-family: Arial;"><span style=""> </span><b style="">OPERATIVE FACTS DOCTRINE.<span style=""> </span></b></span><span style="font-size: 11pt; font-family: Arial;">An unconstitutional law produces legal effect before being declared unconstitutional.<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 11pt; font-family: Arial;"><span style=""> </span>The doctrine of operative fact as an exception to the general rule, only applies as a matter of equity and fair play.<span style=""> </span></span><span style="font-family: Arial;">(<i style="">Planters Products, Inc. v. Fertiphil Corporation, </i>G. R. No. 166006, March 14, 2008 citing <i style="">Republic v. Court of Appeals, </i>G.R. No. 79732, November 8, 1993, 227 SCRA 509)<span style=""> </span></span><span style="font-size: 11pt; font-family: Arial;">It nullifies the effects of an unconstitutional law by recognizing that the existence of a statute prior to a determination of unconstitutionality is an operative fact and may have consequences which cannot always be ignored.<span style=""> </span>The past cannot always be erased by a new judicial declaration.<span style=""> </span></span><span style="font-family: Arial;">(<i style="">Planters Products, Inc, supra </i>citing <i style="">Peralta v. Civil Service Commission, </i>G. R. No. 95832, August 10, 1992, 212 SCRA 425)</span><span style="font-size: 11pt; font-family: Arial;"><o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><b style=""><span style="font-family: Arial;"><o:p> </o:p></span></b></p> <p class="MsoNormal" style="text-align: justify;"><b style=""><span style="font-size: 12pt; font-family: Arial;"><span style=""> </span><i style="">OPINIO JURIS.<span style=""> </span></i></span></b><span style="font-size: 11pt; font-family: Arial;">In international law, specifically in the determination of what forms part of customary law to apply in deciding a specific case, <i style="">opinion juris </i>refers to the material component of the custom or practice to be allied.<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-family: Arial;"><o:p> </o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><b style=""><span style="font-size: 36pt; font-family: "Old English Text MT";">P<o:p></o:p></span></b></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-family: Arial;"><o:p> </o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 12pt; font-family: Arial;"><span style=""> </span><b style="">PACIFIC BLOCKADE </b></span><span style="font-size: 11pt; font-family: Arial;">as a method for forcible settlement of an international dispute without the use of arms.<span style=""> </span>It is a naval operation the purpose of which is to prevent entrance to the ports of the offending State of properties destined therefor, particularly vessels.<span style=""> </span>The ultimate objective is to force the offending State to amend its ways or to provide for redress of the grievance against it.<span style=""> </span></span><span style="font-family: Arial;">(Paras citing Fenwick, International Law, p. 437)<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 11pt; font-family: Arial;"><span style=""> </span>Since there is no state of war yet between the blockading State and the blockaded, the flotilla of vessels that usually enforce the blockade is usually strung outside of the territorial sea of the blockaded State.<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-family: Arial;"><o:p> </o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><b style=""><span style="font-size: 12pt; font-family: Arial;"><span style=""> </span>PACIFIC or CIVIL EMBARGO </span></b><b style=""><span style="font-size: 11pt; font-family: Arial;"><span style=""> </span></span></b><span style="font-size: 11pt; font-family: Arial;">is an instance where the properties, vessels or aircraft belong to the state that is detaining.<span style=""> </span></span><span style="font-family: Arial;">(Fenwick, International Law, p. 435)<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-family: Arial;"><o:p> </o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 12pt; font-family: Arial;"><span style=""> </span><b style=""><i style="">PACTA SUNT SERVANDA.<span style=""> </span></i></b></span><span style="font-size: 11pt; font-family: Arial;">A fundamental principle in international law that a treaty must be observed in good faith.<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 11pt; font-family: Arial;"><span style=""> </span>“Every treaty in force is binding upon the parties to it and must be performed by them in good faith.”<span style=""> </span></span><span style="font-family: Arial;">(</span><st1:city><st1:place><span style="font-family: Arial;">Vienna</span></st1:place></st1:city><span style="font-family: Arial;"> Convention on the Law of Treaties, Article 26)<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-family: Arial;"><o:p> </o:p></span></p> <p class="MsoNormal" style="text-align: justify; text-indent: 0.5in;"><b style=""><span style="font-size: 12pt; font-family: Arial;">PLAIN VIEW DOCTRINE.<span style=""> </span></span></b><span style="font-size: 11pt; font-family: Arial;">Objects falling within the plain view of an officer who has a right to be in the position to have that view are subject to seizure even without a search warrant and may be introduced in evidence</span><span style="font-size: 12pt; font-family: Arial;">.<span style=""> </span><o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-family: Arial;"><o:p> </o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-family: Arial;"><span style=""> </span></span><b style=""><span style="font-size: 12pt; font-family: Arial;">POSTLIMINIUM. </span></b><span style="font-size: 11pt; font-family: Arial;">The rule in international law for the revival of rights belonging or pertaining to persons and things that <o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-family: Arial;"><o:p> </o:p></span></p><span style="font-family: Arial;"><o:p> </o:p></span> <p class="MsoNormal" style="text-align: justify;"><span style="font-family: Arial;"><span style=""> </span></span><b style=""><span style="font-size: 12pt; font-family: Arial;">POSTLIMINY.<span style=""> </span></span></b><span style="font-size: 11pt; font-family: Arial;">Refer to POSTLIMINIUM<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-family: Arial;"><o:p> </o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-family: Arial;"><o:p> </o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-family: Arial;"><o:p> </o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><b style=""><span style="font-size: 12pt; font-family: Arial;"><span style=""> </span>PRESUMPTIVELY PRIVILEGED COMMUNICATION.<span style=""> </span></span></b><span style="font-size: 11pt; font-family: Arial;">There is great public interest in preserving the confidentiality of conversation that takes place in the President’s performance of his official duties.<span style=""> </span></span><span style="font-family: Arial;">[<i style="">Neri v. Senate Committee on Accountability of Public Officers and Investigations, et al., </i>G. R. No. 180643, March 25, 2008 citing <i style="">United States v. Nixon, </i>418 U.S. 683)<span style=""> </span></span><span style="font-size: 11pt; font-family: Arial;">Presidential communications are thus considered as “presumptively privileged.”<span style=""> </span>The presumption is founded on the “President’s generalized interest in confidentiality.”<span style=""> </span></span><span style="font-family: Arial;">(<i style="">Ibid.</i>)<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><b style=""><span style="font-size: 11pt; font-family: Arial;"><span style=""> </span><span style=""> </span></span></b><span style="font-size: 11pt; font-family: Arial;">The privilege is said to be necessary to guarantee the candor of presidential advisors and to provide “the President and those who assist him with freedom toexploire the alternatives in the process of shaping policis and making decisions and to do so in a way many would be unwilling to express except privately.”<span style=""> </span></span><span style="font-family: Arial;">(<i style="">Ibid.</i>)<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-family: Arial;"><o:p> </o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 11pt; font-family: Arial;"><span style=""> </span></span><b style=""><span style="font-size: 12pt; font-family: Arial;">PRETERITION.<span style=""> </span></span></b><span style="font-size: 11pt; font-family: Arial;">This is the omission of the heir in the will, either by not naming him at all or, while mentioning him as father, son, etc., by not instituting him as heir without disinheriting him expressly, nor assigning to him some part of the properties.<span style=""> </span>It is the total omission of a compulsory heir in the direct line from inheritance.<span style=""> </span>There is no preterition where the testator allotted to a descendant a share less than the legitime, since there was no total omission of a forced heir.<span style=""> </span></span><span style="font-family: Arial;">(<i style="">J.L.T. Agro, Inc., v. Balansag, </i>453 SACRA 211)<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 11pt; font-family: Arial;"><span style=""> </span>“The preterition or omission of one, some, or all of the compulsory heirs in the direct line, whether living at the time of the execution of the will or born after the death of the testator, shall annul the institution of heir; but the devises and legacies shall be valid insofar as they are not inofficious.<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 11pt; font-family: Arial;"><span style=""> </span>If the omitted compulsory heirs should die before the testator, the institution shall be effectual, without prejudice to the right of representation.” </span><span style="font-family: Arial;">(C.C.P., Art. 354)<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-family: Arial;"><span style=""> </span><o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 12pt; font-family: Arial;"><span style=""> </span><b style=""><i style="">PROTOCOL DE CLOTURE.<span style=""> </span></i></b></span><span style="font-size: 11pt; font-family: Arial;">Another term for final act or general act.<span style=""> </span><o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 11pt; font-family: Arial;"><span style=""> </span>Refer to FINAL ACT.<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 11pt; font-family: Arial;"><o:p> </o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 11pt; font-family: Arial;"><o:p> </o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 11pt; font-family: Arial;"><o:p> </o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><b style=""><span style="font-size: 36pt; font-family: "Old English Text MT";">Q<o:p></o:p></span></b></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-family: Arial;"><o:p> </o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 12pt; font-family: Arial;"><span style=""> </span><b style="">QUASI-SUSPECT CLASS or INTER-MEDIATE LEVEL OF SCRUTINY TEST.<span style=""> </span></b></span><span style="font-size: 11pt; font-family: Arial;">Refer to INTERMEDIATE LEVEL OF SCRUTINY TEST or QUASI-SUSPECT CLASS.</span><span style="font-size: 12pt; font-family: Arial;"><o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-family: Arial;"><o:p> </o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 12pt; font-family: Arial;"><span style=""> </span><b style=""><span style=""> </span>QUESTION HOUR.<span style=""> </span></b></span><span style="font-size: 11pt; font-family: Arial;">The practice of members of the Cabinet appearing before Congress is a feature of the parliamentary system of Government where the members of the Cabinet are responsible to the parliament and may be the subject of inquiry on any matter pertaining to their departments.<span style=""> </span>Thus our system of government is strongly presidential but with certain features of the parliamentary system.<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 11pt; font-family: Arial;"><o:p> </o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 11pt; font-family: Arial;"><o:p> </o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><b style=""><span style="font-size: 36pt; font-family: "Old English Text MT";">R<o:p></o:p></span></b></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-family: Arial;"><o:p> </o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 12pt; font-family: Arial;"><span style=""> </span><b style="">RATIONAL or TRADITIONAL BASIS TEST.<span style=""> </span></b></span><span style="font-size: 11pt; font-family: Arial;">Refer to TRADITIONAL or RATIONAL BASIS TEST.<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-family: Arial;"><o:p> </o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 12pt; font-family: Arial;"><span style=""> </span><b style=""><i style="">REBUS SIC STANTIBUS.<span style=""> </span></i></b></span><span style="font-size: 11pt; font-family: Arial;">This is a doctrine in international law which posits that a treaty is concluded with the implied condition that it is intended to be binding only as long as there is no vital change in circumstances.<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-family: Arial;"><o:p> </o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 12pt; font-family: Arial;"><span style=""> </span><b style=""><i style="">RECEZ.<span style=""> </span></i></b></span><span style="font-size: 11pt; font-family: Arial;">The act of a Congress in writing down the result of its deliberations on a particular subject matter.<span style=""> </span>This is done prior to final adjournment,<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-family: Arial;"><o:p> </o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 12pt; font-family: Arial;"><span style=""> </span><b style=""><i style="">RECONVENCION.<span style=""> </span></i></b></span><span style="font-size: 11pt; font-family: Arial;">This is of French origin and is another term for recoupment.<span style=""> </span>It means “cutting back of the plaintiff’s claim by the defendant.”<span style=""> </span>It thus implies an admission of the plaintiff’s claim.<span style=""> </span></span><span style="font-family: Arial;">(<i style="">Korea Exchange Bank v. Gonzales, </i>456 SCRA 224)<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 11pt; font-family: Arial;"><span style=""> </span></span><b style=""><span style="font-size: 12pt; font-family: Arial;">REGALIAN DOCTRINE.<span style=""> </span></span></b><span style="font-size: 11pt; font-family: Arial;">The State is the source of any asserted right to ownership of land.<span style=""> </span>This is premised on the basic doctrine that all lands not otherwise appearing to be clearly within private ownership are presumed to belong to the State.<span style=""> </span></span><span style="font-family: Arial;">[<i style="">Republic v. Manna Properties ,Inc., etc.</i> citing <i style="">Pagkatipunan v. Court of Appeals, </i>429 Phil. 149; 390 SCRA 343 (2002)]<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><b style=""><span style="font-family: Arial;"><o:p> </o:p></span></b></p><b style=""><span style="font-family: Arial;"><o:p> </o:p></span></b> <p class="MsoNormal" style="text-align: justify;"><b style=""><span style="font-size: 12pt; font-family: Arial;"><span style=""> </span>REPRISALS </span></b><span style="font-size: 11pt; font-family: Arial;">in international law<b style=""> </b></span><span style="font-size: 11pt; font-family: Arial;">are unfriendly and illegal acts of retaliation, and may be exemplified by confiscation of assets of the other country situated within the territory of the confiscating state.<span style=""> </span>These are different from reprisals perpetrated by belligerents during wartime.<span style=""> </span></span><span style="font-family: Arial;">[Wilson, Handbook of International Law, (1939), p.288]<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-family: Arial;"><o:p> </o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 12pt; font-family: Arial;"><span style=""> </span><b style="">RESULTING TRUST.</b><span style=""> </span></span><span style="font-size: 11pt; font-family: Arial;">A<span style=""> </span>trust presumed to have been contemplated by the parties, the intention as to which is to be found in the nature of their transaction but not expressed in the deed itself.<span style=""> </span></span><span style="font-family: Arial;">(<i style="">Bejoc v. Cabreros, </i>464 SCRA 78)<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-family: Arial;"><o:p> </o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 12pt; font-family: Arial;"><span style=""> </span><b style="">RESUME.<span style=""> </span></b></span><span style="font-size: 11pt; font-family: Arial;">In international law, this is the act of an international conference in reducing to writing the conclusions of its deliberations on a particular subject.<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-family: Arial;"><o:p> </o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 12pt; font-family: Arial;"><span style=""> </span><b style="">RETORSIONS </b></span><span style="font-size: 11pt; font-family: Arial;">are unfriendly but legal acts in retaliation for another’s unfriendly actuations.<span style=""> </span>Examples are discriminatory tariffs. <span style=""> </span></span><span style="font-family: Arial;">(Fenwick, International Law, p. 433)<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-family: Arial;"><o:p> </o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 11pt; font-family: Arial;"><span style=""> </span></span><b style=""><span style="font-size: 12pt; font-family: Arial;">RUN-OFF ELECTION.<span style=""> </span></span></b><span style="font-size: 11pt; font-family: Arial;">Run-off election, in a certification election, takes place between two unions who received the two highest number of votes where not one of the unions obtained the majority of the valid votes cast, provided that the total union votes is at least 50% of the votes cast.<span style=""> </span></span><span style="font-family: Arial;">(Labor Code, Art. 256)<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><b style=""><span style="font-size: 12pt; font-family: Arial;"><o:p> </o:p></span></b></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 11pt; font-family: Arial;"><o:p> </o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 11pt; font-family: Arial;"><o:p> </o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><b style=""><span style="font-size: 36pt; font-family: "Old English Text MT";">S<o:p></o:p></span></b></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-family: Arial;"><o:p> </o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 11pt; font-family: Arial;"><span style=""> </span></span><b style=""><i style=""><span style="font-size: 12pt; font-family: Arial;">SALUS POPULI EST SUPREMA LEX.<span style=""> </span></span></i></b><span style="font-size: 11pt; font-family: Arial;">The safety of the people is the supreme law.<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-family: Arial;"><o:p> </o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 12pt; font-family: Arial;"><span style=""> </span><b style=""><i style="">SIC UTERE TUO UT ALIENUM NON LAEDAS.</i></b><span style=""> </span></span><span style="font-size: 11pt; font-family: Arial;">So use your property so as not to harm others.<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-family: Arial;"><o:p> </o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 12pt; font-family: Arial;"><span style=""> </span><b style=""><i style="">STATUS QUO.</i></b><span style=""> </span></span><span style="font-size: 11pt; font-family: Arial;">Another term for <i style="">status quo ante.<o:p></o:p></i></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-family: Arial;"><o:p> </o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 12pt; font-family: Arial;"><span style=""> </span><b style=""><i style="">STATUS QUO ANTE.</i></b><span style=""> </span></span><span style="font-size: 11pt; font-family: Arial;">This is the last actual, peaceful, and uncontested status that precedes the actual controversy, that which is existing at the time of the filing of the case. </span><span style="font-family: Arial;">(<i style="">Cortez-Estrada v. Heirs of Domingo Samut/Antonia Samut, </i>451 SCRA 275)</span><span style="font-size: 11pt; font-family: Arial;"> <o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 11pt; font-family: Arial;"><span style=""> </span>It is also referred to merely as <i style="">status quo. </i></span><span style="font-family: Arial;">(<i style="">Philippine Ports Authority v. Cipres Stevedoring & Arrastre, Inc., </i>463 SCRA 358)<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 11pt; font-family: Arial;"><span style=""> </span>The <i style="">status quo</i> is what is intended to be maintained by the provisional remedies of a temporary restraining order, a writ of prohibitory or mandatory injunction, etc.<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-family: Arial;"><o:p> </o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 12pt; font-family: Arial;"><span style=""> </span><b style="">STOP AND SEARCH. </b></span><span style="font-size: 11pt; font-family: Arial;"><span style=""> </span>One form of search on vehicles is the “stop-and-search” without warrant at military or police checkpoints which has been declared to be not illegal per se, for as long as it is warranted by the exigencies of public order and conducted in a way least intrusive to motorists.<span style=""> </span>A checkpoint may either be a mere routine inspection<span style=""> </span>or it may involve an intensive search.</span><span style="font-size: 12pt; font-family: Arial;"><span style=""> </span></span><span style="font-family: Arial;">(<i style="">Caballes v. Court of Appeals, et al.,</i> G.R. No. 136292, </span><st1:date year="2002" day="15" month="1"><span style="font-family: Arial;">January 15, 2002</span></st1:date><span style="font-family: Arial;">)</span><span style="font-size: 11pt; font-family: Arial;"><o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 11pt; font-family: Arial;"><span style=""> </span>Routine inspections are not regarded as violative of an individual’s right against unreasonable search.<span style=""> </span>The search which is normally permissible<span style=""> </span>is limited to the following instances: <o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 11pt; font-family: Arial;"><span style=""> </span>a.<span style=""> </span><span style=""> </span>where the officer merely draws aside the curtain of a vacant vehicle which is parked on the public fair grounds;<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 11pt; font-family: Arial;"><span style=""> </span>b.<span style=""> </span><span style=""> </span>simply looks into a vehicle;<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 11pt; font-family: Arial;"><span style=""> </span>c.<span style=""> </span><span style=""> </span>flashes a light therein without opening the car’s doors;<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 11pt; font-family: Arial;"><span style=""> </span>d). <span style=""> </span>where the occupants are not subjected to a physical or body search;<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 11pt; font-family: Arial;"><span style=""> </span>e.<span style=""> </span><span style=""> </span>where the inspection of the vehicles is limited to a visual search or visual inspection; and<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify; text-indent: 0.5in;"><span style="font-size: 11pt; font-family: Arial;">f.<span style=""> </span><span style=""> </span>where the routine check is conducted at a fixed area.<span style=""> </span></span><span style="font-family: Arial;">(<i style="">Caballes v. Court of Appeals, et al</i>., G.R. No. 136292, </span><st1:date year="2002" day="15" month="1"><span style="font-family: Arial;">January 15, 2002</span></st1:date><span style="font-family: Arial;">)<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 11pt; font-family: Arial;"><span style=""> </span>The physical intrusion of the body of the police officer into a vehicle allowed him to see and to smell things he could not see or smell from the outside.<span style=""> </span>This violates the constitution.<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 12pt; font-family: Arial;"><span style=""> </span></span><span style="font-family: Arial;"><o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-family: Arial;"><o:p> </o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 12pt; font-family: Arial;"><span style=""> </span><b style="">STRICT SCRUTINY or COMPELLING INTEREST TEST.<span style=""> </span></b></span><span style="font-size: 11pt; font-family: Arial;">The strict scrutiny (or compelling interest) test.<span style=""> </span>Government regulation that intentionally discriminates against a “suspect class” such as racial or ethnic minorities, is subject to strict scrutiny and considered to violate the equal protection clause unless found necessary to promote a compelling state interest.<span style=""> </span>A classification is necessary when it is narrowly drawn so that no alternative, less burdensome means is available to accomplish the state interest.<span style=""> </span>Thus, it was held that denial of free public education to the children of illegal aliens imposes an enormous and lasting burden based on a status over which the children have no control is violative of equal protection because there is no showing that such denial furthers a “substantial” state goal.</span><span style="font-family: Arial;"><span style=""> </span><i style="">(Plyler v. Doe</i>, 457 </span><st1:country-region><st1:place><span style="font-family: Arial;">U.S.</span></st1:place></st1:country-region><span style="font-family: Arial;"> 202<i style="">)</i><span style=""> </span></span><span style="font-size: 11pt; font-family: Arial;"><o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-family: Arial;"><o:p> </o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><b style=""><span style="font-size: 12pt; font-family: Arial;"><span style=""> </span>SURFACE BARGAINING.<span style=""> </span></span></b><span style="font-size: 11pt; font-family: Arial;">Surface bargaining is defined as “going through the motions of negotiating” without any legal intent to reach an agreement. It is a violation of the duty to bargain collectively.<span style=""> </span></span><span style="font-family: Arial;">[<i style="">Standard Chartered Bank Employees Union (NUBE) v. Confesor, et al</i>., G. R. No. 114974, June 16, 2004 citing <i style="">K-Mart Corporation v. National Labor Relations Commission</i>, 626 F.2d 704[1980])]<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-family: Arial;"><o:p> </o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 12pt; font-family: Arial;"><span style=""> </span><b style="">SYMBOLIC SPEECH.<span style=""> </span></b></span><span style="font-size: 11pt; font-family: Arial;">This refers to expression which is not communicated primarily through words but through behavior such as burning paper mache images, flags, wearing arm bands, shirts with signs, etc. <o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-family: Arial;"><o:p> </o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><b style=""><span style="font-size: 36pt; font-family: "Old English Text MT";">T<o:p></o:p></span></b></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-family: Arial;"><o:p> </o:p></span></p> <p class="MsoNormal" style="text-align: justify; text-indent: 0.5in;"><b style=""><span style="font-size: 12pt; font-family: Arial;">TERRY SEARCH.<span style=""> </span></span></b><span style="font-size: 11pt; font-family: Arial;"><span style=""> </span>"Stop and frisk" is a "limited protective search of outer clothing for weapons."<span style=""> </span>While probable cause is not required to conduct a "stop and frisk," mere suspicion or a hunch will not invalidate it.</span><span style="font-family: Arial;"><span style=""> </span>(<i style="">Malacat v. Court of Appeals,</i> G.R. No. 123595, December 12, 1997; <i style="">People v. Escano, et al.,</i> G.R. Nos. 129756-58, January 28, 2000) </span><span style="font-size: 11pt; font-family: Arial;"><o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><b style=""><span style="font-family: Arial;"><o:p> </o:p></span></b></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 12pt; font-family: Arial;"><span style=""> </span><b style="">TOBAR DOCTRINE.<span style=""> </span></b></span><span style="font-size: 11pt; font-family: Arial;">A proposal made by the then </span><st1:country-region><st1:place><span style="font-size: 11pt; font-family: Arial;">Ecuador</span></st1:place></st1:country-region><span style="font-size: 11pt; font-family: Arial;"> Foreign Minister Carlos Tobar that a state should not recognize a government that has come into power through unconstitutional means.<o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-family: Arial;"><o:p> </o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-size: 12pt; font-family: Arial;"><span style=""> </span><b style="">TRADITIONAL or RATIONAL BASIS TEST.<span style=""> </span></b></span><span style="font-size: 11pt; font-family: Arial;">The traditional (or rational basis) test.<span style=""> </span>The classification is valid if it is rationally related to a constitutionally permissible state interest. The complainant must prove that the classification is “invidious,” “wholly arbitrary,” or ”capricious,” otherwise the classification is presumed to be valid.</span><span style="font-family: Arial;"><span style=""> </span><i style="">(Lindsley v. Natural Carbonic Gas Co., 220 </i></span><st1:country-region><st1:place><i style=""><span style="font-family: Arial;">U.S.</span></i></st1:place></st1:country-region><i style=""><span style="font-family: Arial;"> 61; McGowan v. </span></i><span style="font-family: Arial;"><span style=""> </span></span><st1:state><st1:place><i style=""><span style="font-family: Arial;">Maryland</span></i></st1:place></st1:state><i style=""><span style="font-family: Arial;">, </span></i><span style="font-family: Arial;">366 </span><st1:country-region><st1:place><span style="font-family: Arial;">U.S.</span></st1:place></st1:country-region><span style="font-family: Arial;"> 420<i style="">; </i></span><st1:country-region><st1:place><i style=""><span style="font-family: Arial;">United States</span></i></st1:place></st1:country-region><i style=""><span style="font-family: Arial;"> Railroad Retirement Board v. Fritz, </span></i><span style="font-family: Arial;">449 </span><st1:country-region><st1:place><span style="font-family: Arial;">U.S.</span></st1:place></st1:country-region><span style="font-family: Arial;"> 166<i style="">)</i><span style=""> </span><o:p></o:p></span></p> <p class="MsoNormal" style="text-align: justify;"><span style="font-family: Arial;"><span style=""> </span></span><span style="font-size: 11pt; font-family: Arial;">In our jurisdiction the standard and analysis of equal protection challenges have followed the “rational basis” test coupled with a differential attitude to legislative classifications and a reluctance to invalidate a law unless there is a showing of a clear and unequivocal breach of the Constitution.<span style=""> </span></span><span style="font-family: Arial;" lang="ES-TRAD">(<i style="">Central Bank etc., v. Bangko Sentral ng Pilipinas, etc., </i>G. R. No. 148208, December 15, 2004)</span><span style="font-size: 12pt; font-family: Arial;"><o:p></o:p></span></p> Anonymoushttp://www.blogger.com/profile/03321018346771806482noreply@blogger.com0tag:blogger.com,1999:blog-5764462155582353229.post-4847794873071586582008-09-03T12:28:00.000+08:002008-09-03T12:30:05.096+08:00PRIMUS 2008 ONE-LINERS: POLITICAL AND PUBLIC INTERNATIONAL LAW“PRIMUS 2008 ONE-LINERS”<br /><br /> POLITICAL AND PUBLIC INTERNATIONAL LAW<br />VER. 2008.09.01<br />copyrighted 2008<br /><br />Prepared by the PRIMUS Board of Consultants<br />Prof. Abelardo T. Domondon<br />Principal Consultant<br /><br /> These Notes in the form of one or two sentences were specially prepared by a Board of Consultants specially commissioned by PRIMUS Information Center, Inc., for the use of candidates who are going to take the 2008 Bar Examination. They are not as comprehensive as the other PRIMUS publications such as the PRIMUS Bar Star Notes, or the PRIMUS Cut and Paste. They are intended to be read during the Pre-Week or before the start of the regular Bar review for any given Bar Examination year. <br /><br /> These Notes attempt to second guess the areas where questions may probably be sourced for the 2008 Bar Examination in Political and Public International Law. They include enumerations and distinctions, as well digests of some landmark cases, although they go beyond two sentences. They may also serve as “memory joggers” to help the candidate recall concepts. The reader is advised to concentrate on the “One-liners” that are in bold letters. Those that are not in bold are mere elucidations of concepts.<br /><br /> The “PRIMUS 2008 ONE-LINERS” shall be revised regularly to consider latest law and jurisprudence to meet the requirements of future Bar Reviews such that the title shall change from year to year. For the 2009 Bar examination the title shall be “PRIMUS 2009 ONE-LINERS” which shall be released sometime in September, 2009. The reader is however advised to acquire and read the latest versions of the other PRIMUS publications such as the PRIMUS Bar Star Notes, or the PRIMUS Cut and Paste which contain more detailed information leading to a more comprehensive Bar review. Of course those who intend to take the 2009 Bar examination are encouraged to attend the PRIMUS 2009 Wrap-up Reviews<br /> <br /> Although primarily for the use of Bar candidates who have attended the PRIMUS 2008 Wrap-up Reviews, the “On-Liners” may be availed of by other students who are interested in the subject. While available for the free use of all the contents of the “PRIMUS 2008 ONE-LINERS” are covered by copyright protection and should never be published (whether through printed media or through the internet) without written permission in writing from PRIMUS Information Center, Inc. Downloading and printing into hard copies is allowed only for private use and should not be distributed on a commercial basis.<br /><br />POLITICAL LAW<br /><br />INTRODUCTION<br /><br />GENERAL CONCEPTS<br /><br /> 1. Republic of the Philippines refers to the corporate governmental entity through which the functions of government are exercised throughout the Philippines, including, save as the contrary appears from the context, the various arms through which political authority is made effective in the Philippines, whether pertaining to the autonomous regions, the provincial, city, municipal or barangay subdivisions or other forms of local government. [Introductory Provisions, Sec. 2 (1), Adm. Code of 1997]<br /><br />2. “Government-owned or controlled corporation refers to any agency organized as a stock or non-stock corporation, vested with functions relating to public needs whether governmental or proprietary in nature, and owned by the Government directly or through its instrumentalities either wholly, or, where applicable as in the case of stock corporations, to the extent of at least fifty one (51) per cent of its capital stock.” [Introductory Provisions, Sec. 2 (13), Adm. Code of 1997]<br /><br /> 3. Agency is defined as any government authority other than a court or legislative body which affects private rights, either through rule-making or adjudication.<br /> <br /> 4. Agency refers to any of the various units of the Government, including a department, bureau, office, instrumentality, or government-owned or controlled corporation or a local government or a distinct unit thereof. [Sec. 2 (4), Introductory Provisions, Administrative Code of 1987]<br /><br /> 4. Examples of government agencies:<br /> a. The Land Transportation Office is an agency of the government because it is an office under the Department of Transportation and Communication.<br /> b. The Department of Public Works and Highways is an agency because it is a department.<br /><br /> 7. Government-owned and controlled corporations may fall within the scope and meaning of the “Government of the Philippines” if they perform functions that are governmental in character acting as the entity through which the functions of government are exercised throughout the Philippines.<br /><br /> 8. Instrumentality refers to any agency of the National Government, not integrated within the department framework vested with special functions or jurisdiction by law, endowed with some if not all corporate powers, administering special funds, and enjoying operational autonomy, usually through a charter. This term includes regulatory agencies chartered institutions and government-owned or controlled corporations. [Sec. 2 (10), Introductory Provisions, Administrative Code of 1987]<br /><br /> 9. Examples of government instrumentalities:<br /> a. Bangko Sentral ng Pilipinas is an instrumentality because it is vested with the special functions of being the central monetary authority, and enjoys operational autonomy through its charter.<br /> b. Philippine Ports Authority is an instrumentality because it is merely attached to the Department of Transportation and Communication. It is vested with the special function of regulating ports, and it is endowed with all corporate powers through its charter.<br /> c. The Land Bank of the Philippines is a government instrumentality because it is vested with the special function of financing agrarian reform. It is endowed with all corporate powers, and it enjoys autonomy through a charter.<br /> d. The Manila International Airport Authority (MIAA is not a government owned or controlled corporation but an instrumentality of the government that is exempt from taxation.<br /> It is an instrumentality exercising not only governmental but also corporate powers. It exercises governmental powers of eminent domain, police power authority, and levying of fees and charges.<br /> Finally, the airport lands and buildings are property owned by the government that are devoted to public use and are properties of the public domain. (Manila International Airport Authority v. Court of Appeals, et al., G. R. No. 155650, July 20, 2006)<br /><br /> 10. A presidential government is one in which the state, the sovereign, makes the executive independent of the legislative, both in tenure and prerogative, and furnishes him with sufficient power to prevent the legislative from trenching upon the sphere marked out by the State as executive independence and prerogative. (Garner)<br /><br /> 11. The principal identifying feature of a presidential form of government is embodied in the separation of powers doctrine. Each department of government exercises powers granted to it by the Constitution and may not control, interfere with or encroach upon the acts done within the constitutional competence of the others. However, the Constitution also gives each department certain powers by which it may definitely restrain the others from improvident action, thereby maintaining a system of checks and balances among them, thus, preserving the will of the sovereign expressed in the Constitution. (UP Law Center)<br /><br /> 12. A parliamentary government is one in which the state confers upon the legislature the complete control of the administration of laws. Under this system, the Cabinet or Ministry is immediately and legally responsible to the legislature or one branch thereof, usually the more popular chamber, and mediately or politically responsible to the electorate, while the titular or nominal executive – the King or Chief of State –occupies a position of irresponsibility.” (Garner)<br /><br /> 13. The essential characteristic of a parliamentary form of government is the fusion of the legislative and executive branches in parliament; the prime minister, who is the head of government, and the members of the cabinet, who are chosen from among the members of parliament and as such are accountable to the latter. <br /> Another feature is that the prime minister may be removed from office by a vote of loss of confidence by the parliament. There may be a head of state who may or may not be elected (UP Law Center) and who usually merely exercises ceremonial functions.<br /><br /> 14. Advantages of a unicameral form of legislature:<br /> a. The Philippines is a simple and unitary state unlike the United States which is federal. There is no necessity for a bicameral system because there are no dual interests to be represented, i.e. the national or federal and local or state.<br /> b. It is simple in organization and deals quickly with the problems of legislation.<br /> c. It is more economical and would save a lot of because there is only one chamber.<br /> d. It is free from deadlocks between the Senate and the House, as well as recriminations which usually plague a two-chambered body.<br /> e. Responsibility is easily pinpointed there being only one deliberative body.<br /> <br /> 15. A unitary or centralized government is one in which the powers of government are vested in one supreme organ from which all local governing authorities derive their existence and powers. <br /> The Philippine government is an example of a unitary form of government.<br /><br /> 16. The essence of a unitary form of government is the fact that a single organization has been created by the sovereign people (the people) through their constitution, to which is left the task of providing for the territorial distribution of governmental powers with which it is invested. (Aruego and Laguio)<br /><br /> 17. A federal form of government is one in which the governmental powers are, by the common sovereign, distributed between a central government and the local governments, each being supreme within its own sphere. (Aruego and Laguio)<br /><br /> DELEGATION OF POWERS<br /><br /> 1. The two accepted tests to determine whether or not there is a valid delegation of legislative power are the Completion Test and the Sufficient Standard Test. <br /><br /> 2. The Completeness Test which characterizes a valid delegation of legislative power means that the law being complete in itself must set forth the policy to be carried out by the delegate.<br /><br /> 3. The Sufficient Standard Test which is a characteristic of a valid delegation of legislative power means that the limits to which the delegate must conform in the performance of his functions are determinate and determinable.<br /><br /> 4. There is no undue delegation of legislative power when the VAT law provides that the President shall, effective January 1, 2006, raise to 12% the VAT rate. What was delegated was not the power to tax but only of the discretion as to the execution of the law. [Abakada Guro Party List (etc.) v. Ermita, etc., et al., G. R. No. 168056, September 1, 2005 and companion cases citing various cases]<br /><br /> 5. Congress does not abdicate its functions or unduly delegate power when it describes what job must be done, who must do it, and what is the scope of his authority. <br /> In the Abakada Guro case the President of the Philippines becomes merely the agent of the legislative department, to determine and declare the event upon which its expressed will takes place. The President cannot set aside the findings of the President, who is now under the conditions acting as the legislature’s alter ego or subordinate. [Abakada Guro Party List (etc.) v. Ermita, etc., et al., G. R. No. 168056, September 1, 2005 and companion cases citing various cases]<br /><br /> 6. There is improper delegation of legislative authority if the law does not provide for the term of imprisonment leaving the same to the discretion of the court. <br /> Declared invalid was the proviso in Sec. 32 of R. A. No. 4670 (The Magna Carta for Public School Teachers) to the effect that certain violations shall be penalized by a “fine of not less than one hundred pesos nor more than one thousand pesos or by imprisonment, in the discretion of the court.” (emphasis supplied)<br /> Leaving to the court’s discretion the determination of the minimum and maximum term of imprisonment is granting a wide latitude to fix the imprisonment without any sufficient standard. This power is essentially legislative and may not be unduly delegated. (People v. Dacuycuy, 173 SCRA 90)<br /><br /> SEPARATION OF POWERS<br /><br /> 1. The Ombudsman has disciplinary authority over all government employees, elective or appointive, except members of Congress and the Judiciary. <br /><br /> 2. It is violative of separation of powers for Supreme Court to compel Congress to reinstate a member suspended for disorderly behavior. (Alejandrino v. Quezon, 46 Phil. 83; Osmena v. Pendatun, 109 Phil. 863)<br /><br /> 3. A member of the judiciary may not be investigated by the Ombudsman because it would violate the separation of powers by encroaching upon the Supreme Court’s power of administrative supervision over all courts and their personnel. (Maceda v. Vasquez, 221 SCRA 454)<br /> <br /> 4. The doctrine of separation of powers is violated if the Ombudsman would investigate members of the Supreme Court for allegedly knowingly rendering an unjust decision. (In Re: Laureta, 148 SCRA 382)<br /><br /> 5. A disadvantage of the separation of powers which is overcome by compromise between the contending parties. is that the Separation of Powers often impairs efficiency, in terms of dispatch and the immediate functioning of government. <br /> It is the long-term staying power of government that is enhanced by the mutual accommodation required by the separation of powers. (Neri v. Senate Committee on Accountability of Public Officers and Investigations, et al., G. R. No. 180643, March 25, 2008)<br /><br /> INHERENT POWERS OF GOVERNMENT<br /><br /> 1. The three great inherent powers of government that may be exercised even without constitutional grant are police power, taxation and eminent domain.<br /> Although inherent the exercise must not contravene the constitution and may be exercise only if there is a law which provides for the details of the exercise.<br /><br /> 2. Police power is based on the twin concepts of salus populi est suprema lex and sic utere tuo ut alienum non laedas.<br /><br /> 3. The two tests, requisites or limitations for valid exercise of police power are lawful subject and lawful means.<br /><br /> 4. Lawful subject as a requisite for valid exercise of police power means that the interest of the public in general require an interference with private rights through the exercise of police power and not the interest of a particular subject.<br /> <br /> 5. Lawful means as a requisite for valid exercise of police power requires that the means adopted must be reasonably necessary for the accomplishment of the purpose. <br /> A reasonable relation must exist between the purposes of the police measure and the means employed for its accomplishment, for even under the guise of protecting the public interest, personal rights and those pertaining to private property will not be permitted to be arbitrarily invaded.<br /> The means employed must not be unduly oppressive upon individuals. (City of Manila, et al., v. Laguio, etc., et al., G. R. No. 118127, April 12, 2005 citing various cases)<br /><br /> 6. Other limitations if the exercise of police power is merely delegated to local government units:<br /> a. The delegation is by express provision of law;<br /> b. It must be exercised within the territorial limits of the delegate;<br /> c. Exercise is not contrary to law. <br /> <br /> 7. Tests for the validity of an ordinance. It must not only be within the corporate powers of the local government unit to enact and must be passed according to the procedure prescribed by law, it must also conform to the following substantive requirements:<br /> a. must not contravene the Constitution or any statute;<br /> b. must not be unfair or oppressive;<br /> c. must not be partial or discriminatory;<br /> d. must not prohibit but may regulate trade;<br /> e. must be general and consistent with public policy; and<br /> f. must not be unreasonable. (City of Manila, et al., v. Laguio, etc., et al., G. R. No. 118127, April 12, 2005 citing Tatel v. Municipality of Virac, G. R. No. 40243, 11 March 1992, 207 SCRA 157, 161 and other cases)<br /><br /> 8. Barangay Assembly or Liga ng mga Barangay both not being local government units cannot exercise legislative powers hence cannot exercise any policed power.<br /><br /> 9. An ordinance prohibiting the establishment, within the Ermita-Malate Area of businesses such as sauna parlors, massage parlors, karaoke bars, beer houses, beer houses, night clubs, day clubs, super clubs, discotheques, cabarets, dance halls, motels, inns. providing certain forms of amusement, entertainment, services and facilities where women are used as tools in entertainment and which tend to disturb the community, annoy the inhabitants, and adversely affect the social and moral welfare of the community and must therefore relocate outside of the Ermita-Malate area is not valid being an invalid exercise of police power because of the following reasons:<br /> a. It violates the equal protection because it prohibits motels and inns but not pension houses, hotels, lodging houses or other similar establishments despite the fact that these establishments are all similarly situated. <br /> b. it prohibits the business and operation of motels in the Ermita-Malate area but not outside of this area. There is no valid classification because a noxious establishment does not become any less noxious if located outside the area. <br /> c. the standard “where women are used as tools for entertainment” is also discriminatory as prostitution – one of the ills the Ordinance aims to banish – not a profession exclusive to women. This discrimination based on gender violates equal protection as it is not substantially related to important government objectives. Thus, the discrimination is invalid.<br /> d. The requisites for the valid exercise of police power are not met because there is no reasonable relation between the purposes of the ordinance and the means employed for its accomplishment. The purpose of the ordinance is the promotion and protection of the social and moral values of the community but the means used the closing down and transfer of business or their conversion into ‘allowed” business will not per se protect and promote the social and moral welfare of the community. It will not in itself eradicate the alluded social ills of prostitution, adultery, fornication nor will it arrest the spread of sexual disease in Manila. (En banc, Tinga, J. City of Manila, et al., v. Laguio, etc., et al., G. R. No. 118127, April 12, 2005)<br /><br /> 10. There is no impairment of the obligations of contract where a zoning ordinance declared an area as commercial and a purchaser of a subdivision lot constructed a commercial building despite the restrictions in the deed of sale. <br /> There was a valid exercise of police power because a zoning ordinance was enacted reclassifying certain areas to protect the health and safety of the residents as a result of the construction of the main highway that made residential living in the subdivision hazardous and dangerous to the health and safety of residents.<br /> 11. A law prohibiting certain types of advertisement (such for tobacco) is valid if it was adopted in the interest of the health, safety, and welfare of the people. (Posadas de Puerto Rico Associates v. Tourism Company of Puerto Rico, 478 U.S. 328) <br /><br /> 12. The Laguna Lake Development Authority (LLDA) in the exercise of police powers granted under its enabling act may prohibit a municipality from operating a dump site. (Laguna Lake Development Authority v. Court of Appeals, et al., 231 SCRA 292) <br /><br /> 13. The abatement of a nuisance is an exercise of police power, not of eminent domain, hence there is no need to pay just compensation.<br /><br /> 14. Power of eminent domain is the “rightful authority, which exists in every sovereignty to control and regulate those rights of a public nature which pertain to its citizens in common, and to appropriate and control individual property for the public benefit, as the public safety, necessity, convenience, or welfare may demand.” (Aruego and Laguio citing Cooley, Constitutional Limitations, Vol. II, p. 1110)<br /><br /> 15. Power of eminent domain distinguished from police power.<br /> a. In the exercise of the power of eminent domain the taking of property is for a public use WHILE in the exercise of police power, the taking is a mere incident to a valid regulation to promote public interest.<br /> b. In the exercise of eminent domain, property or right of property is taken from the owner and transferred to a public agency to be enjoyed by it as its own WHILE in the exercise of the police power the taking of property or a right therein is accomplished not by transfer of ownership but by destroying the property or impairing its value. (Aruego and Laguio)<br /> 16. Constitutional limitations on the exercise of eminent domain.<br /> a. Due process clause and equal protection clause;<br /> b. Private property shall not be taken for public use without adequate compensation. (Lagcao v. Labra, G. R. No. 155746, October 13, 2004)<br /> <br /> 17. Local governments have no inherent power of eminent domain unless specifically granted. By virtue of Section 19 of the Local Government Code, Congress conferred upon LGU’s the power to expropriate. While housing is one of the most serious problems of the country, LGU do not possess unbridled authority to exercise their power of eminent domain in seeking solutions to this problem. Their power is limited by Rep. Act No. 7279, the law that governs expropriation of lands for purposes of urban land reform. Lagcao v. Labra, G. R. No. 155746, October 13, 2004)<br /><br /> 18. Rep. Act No. 7279 is the law that governs the local expropriation of property for purposes of urban land reform. The following are its appropriate provisions:<br /> “SEC. 9. Priorities in the Acquisition of Land. - Lands for socialized housing shall be acquired in the following order:<br /> a) Those owned by the Government or any of its subdivisions, instrumentalities, or agencies, including government-owned or controlled corporations and their subsidiaries;<br /> b) Alienable lands of the public domain;<br /> c) Unregistered or abandoned and idle lands;<br /> d) Those within the declared Areas or Priority Development, Zonal Improvement Program sites, and Slum Improvement and Resettlement Program sites, which have not yet been acquired;<br /> e) Bagong Lipunan Improvement of Sites and Services or BLISS which have not yet been acquired; and<br /> f) Privately-owned lands.<br /> “Where on-site development is found more practicable and advantageous to the beneficiaries, the priorities mentioned in this section shall not apply. The local government units shall five budgetary priority to on-site development of government lands.<br /> “SEC.10. Modes of Land Acquisition.- The modes of acquiring lands for purposes of this Act shall include, among others, community mortgage, land swapping, land assembly or consolidation, land banking, donation to the Government, joint venture agreement, negotiated purchase, and expropriation: Provided, however, That expropriation shall be resorted to only when other modes of acquisition have been exhausted: provided further, That where expropriation is resorted to, parcels of land owned by small property owners shall be exempted for purposes of this Act: x x x “<br /><br /> 19. The acquisition of property for social housing is for public use which is not diminished by the fact that only a few and not everyone will benefit from the expropriation. (Philippine Columbian Association v. Panis, 228 SCRA 668) <br /> <br /> 20. Condemnation of small lots not intendment of power of eminent domain. Condemnation of private lands in an irrational or piecemeal fashion or the random expropriation of small lots to accommodate no more than a few tenants or squatters is certainly not the condemnation for public use contemplated by the Constitution. This is depriving a citizen of his property for the convenience of a few without perceptible benefit to the public. (Lagcao v. Labra, G. R. No. 155746, October 13, 2004 citing Urban Estates, Inc. v. Montesa, 88 Phil. 348 [1951])<br /> 21. Reconciliation between holding in Philippine Columbian Association and Lagcao. Philippine Columbian benefits to few does not result to invalidity of expropriation WHILE Lagcao refers to expropriation of small parcels as invalidating expropriation.<br /> <br /> 22. Local governments do not have inherent power of eminent domain unless specifically granted. By virtue of the Local Government Code, Congress conferred upon LGU’s the power to expropriate. <br /> While housing is one of the most serious problems of the country, LGU do not possess unbridled authority to exercise their power of eminent domain in seeking solutions to this problem. (Lagcao v. Labra, G. R. No. 155746, October 13, 2004)<br /><br /> 23. A private commercial complex may not be expropriated so that the profits from its operation by the government would be used to finance housing projects for government employees. It is a taking for private purpose. (Manotok v. National Housing Authority, 150 SCRA 89) <br /><br /> 24. A city ordinance which expropriates a parcel of land cannot fix the value of land, even if it is based on fair market value at the time of enactment ,because there may be supervening events which may change such value at the time of taking. <br /><br /> 25. The legal rate of 6% should be used in computing interest on just compensation. CB Circular No. 416 which increased the legal interest to 12% is applicable only to loans and not to expropriation proceeds. (National Power Corporation v. Angas, 208 SCRA 542)<br /><br /> 25. A judge cannot validly withhold the issuance of a writ of possession in expropriation while awaiting full payment. The government could immediately take possession of the property upon deposit of the provisional value with the National or Provincial Treasurer. (National Power Corporation v. Jocson, 206 SCRA 520) <br /><br /> 26. The Department of Agrarian Reform cannot require a local government unit to secure an authority from it before converting an expropriated agricultural land to be converted into a housing project for the poor. To require such, would result to the DAR determining the public use to which the expropriated property shall be devoted which is the prerogative of the LGU. (Province of Camarines Sur v. Court of Appeals, 222 SCRA 173)<br /><br />27. Power of taxation can also be used to implement power of eminent domain. Tax measures are but ”enforced contributions exacted on pain of penal sanctions” and “clearly imposed for public purpose.” In most recent years, the power to tax has indeed become a most effective tool to realize social justice, public welfare, and the equitable distribution of wealth. (Commissioner of Internal Revenue v. Central Luzon Drug Corporation, G.R. No. 159647, April 16, 2005)<br /><br />28. Social justice cannot be invoked to trample on the rights of property owners. It is not intended to take away rights from a person and give them to another who is not entitled thereto. For this reason a just compensation for income that is take away from establishments becomes necessary. <br />It is in the tax credit (now tax deduction under current law) that our legislators find support to realize social justice, and no administrative body can alter that fact. (Commissioner of Internal Revenue v. Central Luzon Drug Corporation, G.R. No. 159647, April 16, 2005)<br /><br /> <br /><br /> STATE IMMUNITY FROM SUIT<br /><br />Refer to PUBLIC INTERNATIONAL LAW, infra for a discussion of the sovereign state immunity of foreign states.<br /><br /> 1. State immunity from suit means that the state may not be sued without its consent. A corollary of such principle is that properties used by the State in the performance of its governmental functions cannot be subject to judicial execution.<br /> <br /> 2. The two kinds of sovereign immunity are absolute immunity and restrictive immunity.<br /><br /> 3. Under absolute immunity all acts of state are protected by sovereign immunity.<br /><br /> 4. Under restrictive immunity there is a distinction made between jure imperii the sovereign and government acts which is covered by the immunity compared with jure gestonis in which the State’s private, commercial and proprietary acts are not immune from suit. The Philippines adheres to restrictive sovereign immunity. (United States v. Ruiz, 136 SCRA 487, 490-491)<br /><br /> 5. Consent of a state to be sued may be express or implied.<br /><br /> 6. Consent is express when a law is passed providing conditions under which the state may be sued. (Com. Act No. 327 as amended by P.d. No. 1445)<br /><br /> 7. Consent may also be implied from the following acts.<br /> a. A government waives its immunity if it sues thus a counterclaim may be interposed against it. (Froilan v. Pan Oriental Shipping Co., 95 Pil.905)<br /> b. A government agency created for irrigation may not invoke State immunity from suit because it has a personality separate from the National Government and has the capacity to sue and be sued. Furthermore, irrigation is a proprietary function. (Fontanilla v.Maliaman, 179 SCRA 685; 194SCRA 486)<br /> There was an unconditional waiver when the enabling statute was passed creating the agency hence the waiver may include an action based on a quasi-delict. (Rayo v. CFI of Bulacan, 110 SCRA 456) <br /> c. A landowner whose property was taken by the government without prior expropriation or negotiated sale may sue the government because it is deemed to have waived its immunity. Otherwise, the guaranty that private property shall not be taken without compensation would be inutile. (Ministerio v. CFI of Cebu, 40 SCRA 464) <br /><br /> 8. Waiver of the State of its immunity does not mean that it is admitting liability. (Philippine Rock Industries, Inc. v. Board of Liquidators, 180 SCRA 171) It means that the State in allowing itself to be sued is merely giving the plaintiff an opportunity to prove its case but the State does not waive its lawful defenses. <br /> Consent to suit does not include consent to attachment of property for foreign sovereign. (Dexter v. Carpenter v. Kunglig Jarnvagsstyrelsen, 43F2d 705) <br /> <br /> CONSTITUTIONAL LAW<br /><br /> 1. The essential parts of a good written constitution.<br /> a. Constitution of liberty<br /> 1) Fundamental civil and political rights <br /> 2) Limitation on governmental powers<br /> b. Constitution of government<br /> 1) Organization of government<br /> 2) Enumeration of powers and rules relative to administration<br /> c. Constitution of sovereignty<br /> 1) Procedure for amendment <br /><br /> PREAMBLE<br /><br /> Art. I. NATIONAL TERRITORY<br /><br /> 1. The national territory comprises of the Philippine archipelago, with all the islands and waters embraced therein, and all other territories over which the Philippines has sovereignty or jurisdiction,<br /> a. consisting of its terrestrial, fluvial and aerial domains.<br /> b. Including its territorial sea, the seabed, the subsoil, the insular shelves and other submarine areas.<br /> c. The waters around, between, and connecting the islands of the archipelago, regardless of their breadth and dimensions, form part of the internal waters of the Philippines. (Art. I, 1987 Constitution, arrangement and numbering supplied)<br /><br /> 2. Archipelagic doctrine emphasizes the unity of land and waters by defining an archipelago either as a group of islands surrounded by waters or a body of waters studded with islands.<br /> For this purpose, the doctrine requires that baselines be drawn by connecting the appropriate points of the outermost islands to encircle the islands within the archipelago. The waters on the landward side of the baselines regardless of breadth or dimensions are merely internal waters.<br /> <br /> 3. Territorial sea is the adjacent belt of sea with a breadth of twelve (12) nautical miles measured from the baselines of a state and over which the state has sovereignty. (Articles 2 and 3, Convention on the Law of the Sea)<br /> Ships of all states enjoy the right of innocent passage through the territorial sea. (Article 14,Convention on the Law of the Sea)<br /><br /> 4. Internal waters are the waters around, between, and connecting the islands of the archipelago, regardless of their breadth and dimensions, form part of the internal waters of the Philippines. (Article 1, 1987 Constitution)<br /> There is no right of innocent passage for foreign vessels in the case of internal waters. <br /><br /> 5. Contiguous zone is a zone contiguous to the territorial sea and extends up to twelve (12) nautical miles from the territorial sea and over which the coastal state may exercise control necessary to prevent infringement of its customs, fiscal, immigration or sanitary laws and regulations within its territory or territorial sea. (Article 33 of the Convention on the Law of the Sea)<br /><br /> 6. Exclusive economic zone. A zone extending up to 200 nautical miles from the baselines of a state over which the coastal state has sovereign rights for the purpose of exploring and exploiting, conserving and managing the natural resources, whether living or non-living, of the waters superjacent to the seabed and of the seabed and subsoil, and with regard to other activities for the economic exploitation and exploration of the zone. (Articles 56 and 57, Convention on the Law of the Sea)<br /><br /> 7. Rights of the coastal state in the exclusive economic zone:<br /> a. Sovereign rights for the purpose of exploring and exploiting, conserving and managing the natural resources, whether living or non-living, of the waters superjacent to the seabed and of the seabed and subsoil,<br /> b. Sovereign rights with regard to other activities for the economic exploitation and exploration of the zone or EEZ such as production of energy from water, currents and winds;<br /> c. Jurisdictional right with respect to establishment and use of artificial islands;<br /> d. Jurisdictional right as to protection and preservation of the marine environment;<br /> e. Jurisdictional right over marine scientific research; and<br /> f. Other rights and duties provided for in the Law of the Sea Convention. (Article 56, Convention on the Law of the Sea)<br /><br /> 7. Flag state means that a ship has the nationality of the flag it flies, but there must be a genuine link between the state and the ship. (Article 91, Convention of the Law of the Sea)<br /><br /> 8. Flag of convenience. The flag of a country in which a merchant ship is registered solely in order to save on taxes and avoid the more stringent regulations imposed by other countries regarding such matters as safety, wages, environmental controls and working conditions. (Webster Randon)<br /> <br /> Art. II DECLARATION OF PRINCIPLES AND STATE POLICIES<br /><br /> PRINCIPLES<br /><br /> 1. The doctrine of incorporation means that generally accepted principles of international law are incorporated as part of the law of the land without need of legislative enactment.<br /> <br /><br /> 2. “The Armed Forces of the Philippines is the protector of the people and the State. Its goal is to secure the sovereignty of the State and the integrity of the national territory.” (Art. II, Sec. 3, 1987 Constitution)<br /><br /> 3. Armed Forces of the Philippines distinguished from the Philippine National Police.<br /> a. Functions. The function of the AFP is to protect the people and the State. Its goal is to secure the sovereignty of the State and the integrity of the national territory WHILE that of the PNP is to maintain peace and order, and to protect life and property.<br /> b. Confirmation. Appointment of AFP officers from the rank of colonel or naval captain are subject to confirmation by the Commission on Appointments WHILE such confirmation is required for PNP officers of the same level.<br /> c. The AFP is basically military in character and its personnel are not members of the civil service WHILE the PNP is civilian in character and its personnel are members of the civil service.<br /> d. No member of the AFP in the active service shall at any time be appointed or designated to a civilian position in the Government including government-owned or controlled corporations or any of their subsidiaries WHILE such constitutional prohibition does not find application to PNP members.<br /><br /> 4. Constitutional provisions that institutionalize the principle of civilian supremacy.<br /> a. Civilian authority is, at all times, supreme over the military. (Art. II, Sec. 3, 1st sentence) <br /> b. The President shall be the Commander-in-Chief of all armed forces of the Philippines. (Art. VII, Sec. 18, 1st sentence) <br /> c. All members of the armed forces shall take an oath or affirmation to uphold and defend the Constitution. [Art. XVI, Sec. 5 (1)] <br /> d. The State shall strengthen the patriotic spirit and nationalist consciousness of the military, and respect for people’s rights in the performance of their duties. [Art. XVI, Sec. 5 (1)] <br /> e. No member of the military shall engage directly or indirectly in any partisan political activity, except to vote. [Art. XVI, Sec. 5 (3), 2nd par.] <br /><br /> STATE POLICIES<br /><br /> 1. The State policy on ecology. “The State shall protect and advance the right of the people and their posterity to a balanced and healthful ecology in accord with the rhythm and harmony of nature.” (Sec. 16, Art. II, 1987 Constitution)<br /><br /> 2. The State policy on cultural minorities. “The State recognizes and promotes the rights of indigenous cultural communities within the framework of national unity and development.” (Sec.22, Art. II, 1987 Constitution)<br /><br /> Art. III BILL OF RIGHTS<br /><br /> 1. Civil rights refers to the rights secured by the constitution of any state or country to all its inhabitants and not connected with the organization or administration of government. It defines the relations of individuals among themselves.<br /> They are rights capable of being enforced or redressed in a civil action. (Republic v. Sandiganbayan, et al., G. R. No. 104768, July 21, 2003)<br /><br /> 2. Examples of civil rights are the rights against involuntary servitude, religious freedom, guarantee against unreasonable searches and seizures, liberty of abode, etc.<br /> <br /> <br /><br /> 3. A contract may not impair the basic civil rights of marriage and procreation. These are part of the liberty protected under the due process clause. Waiver of basic human rights is void. Contractual property rights could not prevail over basic human rights. <br /><br /> 4. Human rights are the basic natural rights which inherent man because of his humanity. The right to life, dignity and existence may be considered as human rights.<br /><br /> 5. Political rights consist in the power to participate directly or indirectly, in the management of the government. It defines the relations between the individuals and the state.<br /><br /> 6. Examples of political rights are the right of suffrage, right of assembly, right to petition the government for redress of grievances.<br /> <br /> 7. Distinctions between civil rights and political rights:<br /> a. Civil rights refers to all constitutionally guaranteed and protected not connected with the organization or administration of government WHILE political rights are those related to the establishment, management or support of the government;<br /> b. Civil rights defines the relations between individuals WHILE political rights defines the relations between individuals and the State;<br /> c. Civil rights extend protection to all inhabitants of a State WHILE political rights protect only citizens. (UP Law Center)<br /><br /> 8. Distinctions between human rights on one hand, and civil and political rights on the other.<br /> a. The scope of human rights is broader than civil and political rights. Human rights also include social, economic, and cultural rights.<br /> b. Human rights are natural rights that are inherent in every person because they exist as humans. Every human being possess them everywhere, anywhere irrespective of national boundaries as a result of his being human WHILE some civil and political rights require that a statute should grant them. (UP Law Center)<br /><br /> DUE PROCESS<br /><br /> 1. “No person shall be deprived of life, liberty, or property without due process of law, nor shall any person be denied the equal protection of the laws.” (Sec. 1, Article III, 1987 Philippine Constitution)<br /><br /> 2. Liberty as to come under constitutional protection is not mere freedom from physical restraint of the person of the citizen, but is deemed to embrace the right of man to enjoy the faculties with which he has been endowed by his Creator, subject only to such restraint as are necessary for the common welfare.” (City of Manila, et al., v. Laguio, etc., et al., G. R. No. 118127, April 12, 2005 citing Rubi v. Provincial Board, 39 Phil.660 (1919),as cited in Morfe v. Mutuc,130 Phil. 415,440; 22 SCRA 424, 440 (1968)]<br /> <br /> 3. There is no controlling and precise definition of due process.<br /> It furnishes though a standard to which governmental action should conform in order that deprivation of life, liberty or property, in each appropriate case, be valid.<br /> This standard is aptly described as a responsiveness to the supremacy of reason, obedience to the dictates of justice, [City of Manila, et al., v. Laguio, etc., et al., G. R. No. 118127, April 12, 2005 citing Ermita-Malate Hotel and Motel Operators Association, Inc .v. City Mayor of Manila, 20SCRA 849,860 (1967)] and as such it is a limitation upon the exercise of the police power. [City of Manila, et al., supra citing In re Lutker, Okl. Cr. 274P. 2d 786, 789,790) <br /> Due process includes the right to decisional privacy, which refers to the ability to make one’s own decisions and act on those decisions free from governmental or other unwanted interference. ]Grisworld v. Connecticut, 381 U.S. 415 (1965)]<br /> This clause has been interpreted as imposing two separate limits on government, usually called “procedural due process” and ”substantive due process.” . ( City of Manila, et al., supra)<br /><br /> 4. Purpose of guaranty of due process. <br /> a. To prevent governmental encroachment against the life, liberty and property of individuals;<br /> b. to secure the individual from the arbitrary exercise of the powers of the government, unrestrained by the established principles of private rights and distributive justice;<br /> c. to protect property from confiscation by legislative enactments, from seizure, forfeiture, and destruction without a trial and conviction by the ordinary mode of judicial procedure; and<br /> d. to secure to all persons equal and impartial justice and the benefit of the general law. [City of Manila, et al., v. Laguio, etc., et al., G. R. No. 118127, April 12, 2005 citing 16 C.J.S.,pp.1150-1151,numbering supplied)<br /> The guaranty serves as a protection against arbitrary regulation, and private corporations and partnerships are persons within the scope of the guaranty insofar as their property is concerned. [City of Manila, et al., supra, citing Smith, Bell & Co. v. Natividad, 40 Phil.136, 145 (1919)]<br /><br /> 5. Procedural due process are the procedures that the government must follow before it deprives a person of life, liberty, or property. <br /> Classic procedural due process issues are concerned with what kind of notice and what form of hearing the government must provide when it takes a particular action. [City of Manila, et al., v. Laguio, etc., et al., G. R. No. 118127, April 12, 2005 citing Cherimsky, Erwin, Constitutional Law Principles and Policies, 2nd Ed. 523(2002)]<br /><br /> 6. Substantive due process asks whether the government has an adequate reason for taking away a person’s life, liberty, or property.<br /> In other words, substantive due process looks to whether there is a sufficient justification for the government’s action. [City of Manila, et al., v. Laguio, etc., et al., G. R. No. 118127, April 12, 2005 citing Cherimsky, Erwin, Constitutional Law Principles and Policies, 2nd Ed.(2002), at pp. 523-524]<br /> <br /> 7. Rate increases which public utilities may charge shall be promulgated only by government regulatory bodies after proper notice and hearing. However, if the increase is merely provisional in character, it may be issued pending notice and hearing. (Philippine Communications Satellite Corporation v. Alcuaz, 180 SCRA 218) If the provisional rate increase is to be made permanent there is mandatory notice and hearing. <br /> 8. Administrative due process does not require the actual taking of testimony or the presentation of evidence before the same officer who will decide the case. (Adamson & Adamson v. Amores, 152 SCRA 237)<br /><br /> 9. There is due process even if the complainant, the prosecutor and the hearing officers are all connected with one office and all subordinates of the deciding officer because the findings of the subordinates are not binding upon the head of office who is the deciding officer. <br /> What is important is that the respondent was allowed to present his side and the proof he has adduced supports the decision. (Erlanger & Galinger, Inc. v. Court of Industrial Relations, 110 Phil. 470)<br /> <br /> 10. Through its October 22, 1991 Resolution, the Supreme Court prohibited live radio and TV coverage of court proceedings to protect the due process rights of the parties, prevent distraction of the participants, and to avoid a miscarriage of justice.<br /><br /> 11. An Executive Order of a City Mayor may not prohibit artificial methods of birth control such as the use of condoms, pills, intrauterine devices, vasectomy and other methods of surgical sterilization, etc. in public hospitals but not in private clinics because it would violate due process and equal protection. The women’s freedom of choice shall be curtailed and would discriminate against poor women who cannot afford to pay the fees charged by private clinics.<br /><br /> EQUAL PROTECTION<br /><br /> 1. The criteria of equal protection and uniformity, are used interchangeably and is met:<br /> a. when the laws operate uniformly<br /> 1) on all persons<br /> 2) under similar circumstances<br /> b. all persons are treated in the same manner<br /> 1) the conditions not being different<br /> 2) both in privileges conferred and liabilities imposed<br /> 3) favoritism and preference not allowed.<br /> <br /> 2. The commands of the equal protection clause are addressed only to the state or those acting under the color of its authority. (Duncan Association of Detailmen-PTGWO, et al., v. Glaxo Wellcome Philippines, Inc., G. R. No. 1629934, September 17, 2004)<br /> <br /> 3. Requisites of valid classification. <br /> a. There must be substantial distinctions which must make for real differences.<br /> b. The classification must be germane to the issue.<br /> c. It must apply not only to existing conditions but future conditions as well.<br /> d. It must be applicable to all members of the same class. (People v. Cayat, 68 Phil. 12; People v. Vera, 65 Phil. 56)<br /> <br /> 4. The equal protection clause does not take away from the State the power to classify in the adoption of police power laws, but admits of the exercise of the wide scope of discretion in that regard and avoids what is done only when it is without any reasonable basis, and therefore is purely arbitrary. [Re: (a) Request of Assistant Court Administrators, etc., A. M. No. 03-10-05-SC, October 1, 2004; Re: Request for the Grant of Special Distortion Allowance ,etc., A. M. No. 03-11-25-SC, October 1, 2004 citing Lao Ichong v. Hernandez, 101 Phil. 1155 (1957)]<br /><br /> 5. The legislature is not required by the Constitution to adhere to a policy of “all or none.” [Re: (a) Request of Assistant Court Administrators, etc., A. M. No. 03-10-05-SC, October 1, 2004; Re: Request for the Grant of Special Distortion Allowance ,etc., A. M. No. 03-11-25-SC, October 1, 2004 citing De Guzman v. Commission on Elections, G.R. No. 129118, July 19, 2000, 336 SCRA 188]<br /> If the law presumably hits the evil where it is most felt, it is not to be overthrown because there are other instances to which it might have been applied. (Ibid.) Nevertheless, equal protection should extend to every person under circumstances, which, if not identical, are analogous. (Ibid., citing Basco v. Phil. Amusements and Gaming Corp., G. R. No. 91649, May 14, 1991, 197 SCRA 52)<br /><br /> 6. Law prohibiting Chinese citizens from engaging in retail trade violates the equal protection clause. The law discriminates only against Chinese citizens without any valid grounds shown for such classification. There must be a basis to discriminate other than on the basis of citizenship alone.<br /><br /> 7. Tests used by the U.S. Supreme Court to determine the validity of a classification and compliance with the equal protection clause. <br /> a. The traditional (or rational basis) test. <br /> b. The strict scrutiny (or compelling interest) test. <br /> c. The intermediate level of scrutiny (or quasi-suspect class) test. <br /><br /> 8. The traditional (or rational basis) test. The classification is valid if it is rationally related to a constitutionally permissible state interest.<br /> The complainant must prove that the classification is “invidious,” “wholly arbitrary,” or ”capricious,” otherwise the classification is presumed to be valid. (Lindsley v. Natural Carbonic Gas Co., 220 U.S. 61; McGowan v. Maryland, 366 U.S. 420; United States Railroad Retirement Board v. Fritz, 449 U.S. 166)<br /> <br /> 9. The strict scrutiny (or compelling interest) test. Government regulation that intentionally discriminates against a “suspect class” such as racial or ethnic minorities, is subject to strict scrutiny and considered to violate the equal protection clause unless found necessary to promote a compelling state interest.<br /> A classification is necessary when it is narrowly drawn so that no alternative, less burdensome means is available to accomplish the state interest. <br /> Thus, it was held that denial of free public education to the children of illegal aliens imposes an enormous and lasting burden based on a status over which the children have no control is violative of equal protection because there is no showing that such denial furthers a “substantial” state goal. (Plyler v. Doe, 457 U.S. 202)<br /> <br /> 10. The intermediate level of scrutiny (or quasi-suspect class) test. Classification based on gender or legitimacy are not “suspect,” but neither are they judged by the traditional or rational basis test.<br /> Intentional discriminations against members of a quasi-suspect class violate equal protection unless they are substantially related to important government objectives. (Craig v. Boren, 429 U.S. 190) <br /> Thus, a state law granting a property tax exemption to widows, but not widowers, has been held valid for it furthers the state policy of cushioning the financial impact of spousal loss upon the sex for whom that loss usually imposes a heavier burden. (Kahn v. Shevin, 416 U.S. 351)<br /> <br /> 11. The standard used in the analysis of equal protection challenges in the Philippines in the main have followed the “rational basis” test coupled with a differential attitude to legislative classifications and a reluctance to invalidate a law unless there is a showing of a clear and unequivocal breach of the Constitution. (Central Bank etc., v. Bangko Sentral ng Pilipinas, etc., G. R. No. 148208, December 15, 2004)<br /><br /> 12. Tests to determine whether there is justification in taking. Case law in the United States (U.S.) tells us that whether there is such a justification depends very much on the level of scrutiny used. [City of Manila, et al., v. Laguio, etc., et al., G. R. No. 118127, April 12, 2005 citing County of Sacramento v. Lewis,523 U.S. 833, 840(1998)] <br /> For example, if a law is in an area where only rational basis review is applied, substantive due process is met so long as the law is rationally related to a legitimate government purpose. But if it is an area where strict scrutiny is used, such as for protecting fundamental rights, then the government will meet substantive due process only if it can prove that the law is necessary to achieve a compelling government purpose. . [City of Manila, et al., v. Laguio, etc., et al., supra 5 citing Cherimsky, Erwin, Constitutional Law Principles and Policies, 2nd Ed.(2002), at p. 524]<br /><br /> 13. Two remedial alternatives courts face in sustaining the claim against a constitutionally underinclusive scheme”<br /> a. It may declare the statute a nullity and order that its benefits not extend to the class that the legislature intended to benefit or<br /> b. it may extend to the coverage of the statute to include those aggrieved by the exclusion. [Re: (a) Request of Assistant Court Administrators, etc., A. M. No. 03-10-05-SC, October 1, 2004; Re: Request for the Grant of Special Distortion Allowance ,etc., A. M. No. 03-11-25-SC, October 1, 2004 citing Heckler v. Matthews, 465 US 728, 79 L Ed. 2e 646, 104 S Ct. 1387 (1984)]<br /><br /> 14. The VAT law does not violate the due process and equal protection clauses when it reduced the input credits to only 70% of output VAT because input VAT is not property or a property right within the constitutional purview of the due process clause being merely a statutory privilege. Persons have no vested rights in statutory privileges.<br /> The state may change or take away rights, which were created by law of the state, although it may not take away property, which was vested by virtue of such rights. [Abakada Guro Party List (etc.) v. Ermita, etc., et al., G. R. No. 168056, September 1, 2005 and companion cases citing United Paracale Mining Co. V. Dela Rosa, G.R. No. 63786-87, April 7, 1993, 221 SCRA 108, 115)]<br /><br /> 15. There is no such thing as “political libel” exempt from penalty. Unfounded and malicious statements made by one against another in the course of an election campaign, or by reason of differences in political views are not per se constitutionally protected. Although wider latitude is given to defamatory utterances against public officials in connection with or relevant to their performance of official duties (Brillante v. Court of Appeals, et al., G.R. Nos. 118757 & 121571, October 19, 2004 citing Orfanel v. People 141 Phil. 519; 30 SCRA 819 (1969); U.S. v. Bustos, 13 Phil. 690, 701), or against public figures in relation to matters of public interest involving them [Ibid., Ayer Productions v .Capulong, G.R. Nos. L-82830,L-82398, April 29, 1988, 160 SCRA 861; U.S. v. Canete, 38 Phil. 253 (1918)], such defamatory utterances do not automatically fall within the ambit of constitutionally protected speech.<br /> <br /> 16. The equal protection clause is not absolute; rather it permits of reasonable classification. If the classification is characterized by real and substantial differences, one class may be treated differently from another. It is sufficient that the law operates equally and uniformly on all persons under similar circumstances or that all persons are treated in the same manner, the conditions not being different, both in the privileges conferred and the liabilities imposed. (Brillante v. Court of Appeals, et al., G.R. Nos. 118757 & 121571, October 19, 2004 citing various cases)<br /><br /> 17. Under the privilege of “neutral reportage” in libel cases involving matters of public interest in public figures a republisher who accurately and disinterestedly reports certain defamatory statements made against public figures is shielded from liability, regardless of the republisher’s subjective awareness of the truth or falsity of the accusation. (Filipinas Broadcasting Network Inc. v. Ago Medical and Educational Center Bicol Christian College of Medicine (AMEC-BCCM), et al., G.R. Mo. 141994, January 17, 2005 citing 50 Am.Jur. 2d Libel and Slander Sec.313)<br /><br /> 18. The doctrine of “fair comment” states that fair commentaries on matters of public interest are privileged and constitute a valid defense in an action for libel or slander. <br /> It means that while in general every discreditable imputations publicly made is deemed false, because every man is presumed innocent until his guilt is judicially proved, and every false imputation is deemed to be malicious, nevertheless, when the discreditable imputation is made against a public person in his official capacity, it is not necessarily actionable.[Filipinas Broadcasting Network Inc. v. Ago Medical and Educational Center Bicol Christian College of Medicine (AMEC-BCCM), et al., G.R. Mo. 141994, January 17, 2005 citing Borjal v. Court ofAppeals,361 Phil. 1; 301 SCRA 1 (1999)]<br /> <br /> 19. For imputations against an official may be actionable, it must either be a false allegation of fact or a comment based on a false supposition. <br /> If the comment is an expression of opinion, based on established facts, then it is immaterial that the opinion happens to be mistaken, so long as it might reasonably be inferred from the facts.” [Filipinas Broadcasting Network Inc. v. Ago Medical and Educational Center Bicol Christian College of Medicine (AMEC-BCCM), et al., G.R. Mo. 141994, January 17, 2005 citing Borjal v. Court ofAppeals,361 Phil. 1; 301 SCRA 1 (1999)]<br /><br /> 20. Attacks against public figures not necessarily libellous unless there is actual malice which means that the statement was made with knowledge that it was false or with reckless regard of whether it was false or not. [Borjal v. Court ofAppeals,361 Phil. 1; 301 SCRA 1 (1999)]<br /><br /> 21. The imposition of subsidiary imprisonment upon a convict who is too poor to pay a fine violates equal protection because economic status cannot serve as a valid basis for distinguishing the duration of the imprisonment between a convict who is able to pay the fine and one who is not able to pay it. (Tate v. Short, 401 U. S. 395)<br /> CONTRARY STATEMENT: There is no violation of equal protection because punishment should not be tailored to fit the individual, and equal protection does not compel the eradication of every disadvantage caused by poverty. (U.S. ex rel. Previtera v. Kross,382 U.S. 911)<br /><br /> RIGHT AGAINST UNREASONABLE SEARCH AND SEIZURE<br /><br />1. Constitutional protection. The right of the people to be secure in their persons, houses, papers and effects against unreasonable searches and seizures of what ever nature whatever and for any purpose shall be inviolable and<br />no search warrant or warrant of arrest shall issue except upon probable cause to be determined personally by the judge<br />after examination under oath or affirmation of the complainant and the witnesses he may produce, and<br />particularly describing the place to be searched and the persons or things to be seized. (Art. III, Sec. 2, 1987 Constitution)<br />Search and seizure without a judicial warrant becomes “unreasonable” and any evidence obtained therefrom is inadmissible for any purpose in any proceeding. (People v. Nuevas, et al., G. R. No. 170233, February 22, 2007)<br /> The constitutional prohibition against unreasonable searches and seizures is a restraint upon the government and not upon private parties. (Waterous Drug Corporation v. National Labor Relations Commission, 280 SCRA 735)<br /><br /> 2. A search warrant shall not issue but upon probable cause in connection with one specific offense to be determined personally by the judge after examination under oath or affirmation of the complainant and the witnesses he may produce, and particularly describing the place to be searched and the things to be seized which may be anywhere in the Philippines. (Sec. 4, Rule 126, ROC, arrangement and numbering supplied) <br /><br />3. Authority to issue search warrant inherent in all courts. A search warrant is merely a process issued by the court in the exercise of its ancillary jurisdiction and not a criminal action which it may entertain pursuant to its original jurisdiction. The authority to issue search warrants is inherent in all courts and may be effected outside their territorial jurisdiction. (Savage, etc. v. Taypin, et al., G.R. No. 134217 May 11, 2000)<br /><br />4. Application for search warrant does not require certification of no forum shopping. The Rules of Court as amended requires the certification of no forum shopping only for initiatory pleadings, omitting any mention of “applications.” The old Supreme Court Circular 04-94, the old rule on the matter, required such certification even from “applications.” The absence of such certification will not result in the dismissal of an application for search warrant. (Savage, etc. v. Taypin, et al., G.R. No. 134217 May 11, 2000)<br /><br /> 5. Sufficiency of description of place to be searched. The rule is that a description of the place to be searched is sufficient if the officer with the warrant can, with reasonable effort, ascertain and identify the place intended to be searched. (People v. Salanguit, G.R. Nos. 133254-55, April 19, 2001)<br /><br /> 6. Lack of probable cause does not invalidate warrant if item was not seized. The fact that there was no probable cause to support the application for the seizure of the drug paraphernalia does not warrant the conclusion that the search warrant is void. This fact would be material only if drug paraphernalia was in fact seized. The warrant is valid for the other items where probable cause exist. (People v. Salanguit, G.R. Nos. 133254-55, April 19, 2001)<br /><br /> 7. Police officers lawfully searching for firearms ‘inadvertently ” found cocaine in plain view” may lawfully seize the same. (Magoncia v. Palacio, 80 Phil. 770) <br /><br /> 8. A lawful search with is not invalidated by the failure of the searching officers to inform the owner of her right to be silent and to counsel. <br /> These rights may be invoked only if there is custodial investigation where a suspect has been identified and is under investigation. (People v. Dy, 158 SCRA 111) <br /><br /> 9. Articles described in the warrant may be lawfully seized even if found in a neighboring place, which is other than that shown in the warrant, because their possession is illegal. (Magoncia v. Palacio, 80 Phil. 770) <br /><br /> 10. Instances of valid warrantless searches and seizures. Alternatively, when there could be valid warrantless search and seizure.<br />a. Search incident to a lawful arrest. <br /> b. When it involves prohibited articles in "plain view."<br />c. Search of a moving vehicle,<br /> d. Consented warrantless search.<br />e. Customs searches. (People v. Escano, et al., G.R. Nos. 129756-58, January 28, 2000) <br /> f. Searches without warrant of automobiles to prevent violations of smuggling or immigration laws. g. Terry search; and<br />h. Exigent and emergency circumstances. (People v. Nuevas, et al., G. R. No. 170233, February 22, 2007)<br /><br />11. Search in incident to a lawful arrest. A person lawfully arrested may be searched for dangerous weapons or anything which may have been used or constitute proof in the commission of an offense without a search warrant. (Sec. 13, Rule 126, ROC)<br /><br /> 12. Warrantless search as an incident to lawful arrest. A person lawfully arrested may be searched for dangerous weapons or anything which may be used as proof of the commission of the offense. <br /> The lawful arrest being the sole justification for the validity of the warrantless search under the exception, the same must be limited to and circumscribed by the subject, time and place of the arrest.<br /><br /> 13. As to subject, the warrantless search as an incident of a lawful arrest is sanctioned only with respect to the person of the suspect, and things that may be seized from him are limited to “dangerous weapons” or “anything which may be used as proof off the commission of the offense.”<br /> <br /> 14. With respect to time and place of the warrantless search incident to a lawful arrest, it must be contemporaneous with the lawful arrest. <br /> Stated otherwise, to be valid the search must be conducted at about the time of the arrest or immediately thereafter and only at the place where the suspect was arrested, or the premises or surroundings under his immediate control. (People v. Ting, etc., G.R. Nos. 130568-69, March 21, 2000) The search may extend beyond the person of the one arrested to include the permissible area or surroundings within his immediate control.<br /><br />15. Terry search. "Stop and frisk" is a "limited protective search of outer clothing for weapons." <br />While probable cause is not required to conduct a "stop and frisk," mere suspicion or a hunch will not invalidate it. (Malacat v. Court of Appeals, G.R. No. 123595, December 12, 1997; People v. Escano, et al., G.R. Nos. 129756-58, January 28, 2000) <br /><br /> 16. There is a difference between the concepts of "stop and frisk" search and of search incidental to a lawful arrest where a precedent arrest determines the validity of the incidental search.<br /> There could be no valid warrantless arrest in flagrante delicto nor a "hot pursuit" arrest preceding the search if there is a lack of personal knowledge on the part of the arresting office or an overt physical act on the part of the accused, indicating that a crime had just been committed, was being committed, or was going to be committed. (Malacat v. Court of Appeals, G.R. No. 123595, December 12, 1997)<br /><br /> 17. The plain view doctrine. Objects falling within the plain view of an officer who has a right to be in the position to have that view are subject to seizure even without a search warrant and may be introduced in evidence. <br /><br />18. The “plain view” doctrine applies when the following requisites concur:<br />a. the law enforcement officer in search of the evidence must lawfully make an initial intrusion or properly be in a position from which he can particularly view the area. <br />b. The object must be open to eye and hand;<br />b. the discovery of the evidence in plain view is inadvertent;<br />c. it is immediately apparent to the officer that the item he observes may be evidence of a crime, contraband or otherwise subject to seizure. (People v. Doria, 301 SCRA `668, 710 - 711 cited in People v. Elamparo, G.R. No. 121572, March 31, 2000)<br /> <br />19. No need for further search. The “plain view” justifies the seizure of evidence without need of further search. (People v. Compacion, G.R. No. 1242, July 20, 2001; People v. Aspiras, G.R. No. 138382-84, February 12, 2002)<br /><br /> 20. Where the object seized was inside a closed package, and the package proclaims its contents, whether by its distinctive configuration, its transparency, or if its contents are obvious to an observer, then the contents are in plain view and may be seized. <br /> In other words, if the package is such that an experienced observer could infer from its appearance that it contains the prohibited article, then the article is deemed in plain view.<br /> It must be immediately apparent to the police that the items that they observe may be evidence of a crime, contraband or otherwise subject to seizure. (Caballes v. Court of Appeals, et al., G.R. No. 126292, January 15, 2002)<br /><br />21. Warrantless search of vehicles. The rules governing search and seizure have over the years been steadily liberalized whenever a moving vehicle is the object of the search on the basis of practicality. <br />This is so considering that before a warrant could be obtained, the place, things and persons to be searched must be described to the satisfaction of the issuing judge – a requirement which borders on the impossible in the case of smuggling effected by the use of a moving vehicle that can properly transport contraband from one place to another with impunity. <br />A warrantless search of a moving vehicle is justified on the ground that it is not practicable to secure a warrant because the vehicle can be quickly moved out of the locality or jurisdiction in which the warrant must be sought. (Caballes v. Court of Appeals, et al., G.R. No. 136292, January 15, 2002)<br /><br />22. Probable cause should exist for warrantless searches of vehicles. The mere mobility of vehicles does not give the police unlimited discretion to conduct indiscriminate searches without warrants if made within the interior of the territory and in the absence of probable cause. <br />Still and all, the important thing is that there was probable cause to conduct the warrantless search, which must still be present in such a case. (Caballes v. Court of Appeals, et al., G.R. No. 136292, January 15, 2002)<br /><br />23. The term probable cause for warrantless search of vehicles eludes exact definition but it <br />a. signifies a reasonable ground of suspicion supported by circumstances sufficiently strong in themselves to warrant a cautious man’s belief that the person accused is guilty of the offense with which he is charged; or<br />b. the existence of such facts and circumstances which could lead a reasonably discreet and prudent man to believe that an offense has been committed and that the items, articles or objects sought in connection with said offense or subject to seizure and destruction by law is in the place to be searched. <br />The required probable cause that will justify a warrantless search and seizure is not determined by a fixed formula but is resolved according to the facts of each case. (Caballes v. Court of Appeals, et al., G.R. No. 136292, January 15, 2002)<br /><br /> 24. One form of search on vehicles is the “stop-and-search” without warrant at military or police checkpoints which has been declared to be not illegal per se, for as long as it is warranted by the exigencies of public order and conducted in a way least intrusive to motorists. A checkpoint may either be a mere routine inspection or it may involve an intensive search. (Caballes v. Court of Appeals, et al., G.R. No. 136292, January 15, 2002)<br /><br /> 25. Routine inspections are not regarded as violative of an individual’s right against unreasonable search. The search which is normally permissible is limited to the following instances:<br /> a. where the officer merely draws aside the curtain of a vacant vehicle which is parked on the public fair grounds;<br /> b. simply looks into a vehicle;<br /> c. flashes a light therein without opening the car’s doors;<br /> d. where the occupants are not subjected to a physical or body search;<br /> e. where the inspection of the vehicles is limited to a visual search or visual inspection; and<br />f. where the routine check is conducted at a fixed area. (Caballes v. Court of Appeals, et al., G.R. No. 136292, January 15, 2002)<br /><br /> 25. The physical intrusion of the body of the police officer into a vehicle would allow him to see and to smell things he could not see or smell from the outside violates the constitution.<br /> <br /> 26. Consented searches or waiver of the constitutional guarantee, against obtrusive searches requires that to constitute a valid waiver, it must first appear that:<br /> a. The right exists;<br /> b. The person involved had knowledge, either actual or constructive, of the existence of such right; and<br /> c. The said person had an actual intention to relinquish the right. (People v. Figueroa, et al., G.R. No. 124056, July 6, 2000) <br /> d. The consent must be voluntary in order to validate an otherwise illegal detention and search, i.e., the consent is unequivocal, specific, and intelligently given, uncontaminated by any duress or coercion. (Caballes v. Court of Appeals, et al., G.R. No. 136292, January 15, 2002)<br /><br />26. Characteristics of person giving consent to determine validity of consent. Relevant to this determination are the following characteristics of the person giving consent and the environment in which consent is given: <br />a. the age of the defendant;<br />b. whether he was in a public or secluded location;<br />c. whether he objected to the search or passively looked on;<br />d. the education and intelligence of the defendant;<br />e. the presence of coercive police procedures;<br />f. the defendant’s belief that no incriminating evidence will be found;<br />g. the nature of the police questioning;<br />h. the environment in which the questioning took place; and<br />i. the possibly vulnerable subjective state of the person consenting. <br />It is the State which has the burden of proving, by clear and positive testimony, that the necessary consent was obtained and that it was freely and voluntarily given. (Caballes v. Court of Appeals, et al., G.R. No. 136292, January 15, 2002)<br /><br />27. There was valid consented search where the accused accompanied police officers to his house in order to surrender his share of the ransom money. He even brought them to his room upstairs. The consent of the owner of the house to the search effectively removed any badge of illegality, (People v. Deang, et al, G.R. No. 128045, August 24, 2000)<br /> <br />28. The act of the accused in allowing the members of the military to enter his premises and his consequent silence during the unreasonable search and seizure could not be construed as voluntary submission or an implied acquiescence to warrantless search and seizure, especially so when members of the raiding team were intimidating numerous and heavily armed. (People v. Compacion, G.R. No. 12442, July 20, 2001)<br /> <br /> 29. A peaceful submission to a search or seizure is not consent or an invitation thereto, but is merely a demonstration of regard for the supremacy of the law. (People v. Cubcubin, Jr., G.R. No. 136267, July 20, 2001)<br /> <br /> 30. Scope of search pursuant to airport security procedure is not confined to search for weapons under the “Terry search” doctrine. This is authorized under the Anti-Hijacking Law. <br /> Thus, a strip search is conducted by airport security inside the ladies room is not a search after a lawful arrest but in pursuance of law is valid. (People v. Canton, G. R. No. 148825,December 27, 2002)<br /><br />31. Warrantless customs search. REASONS why there is no necessity for the Bureau of Customs to secure a judicial search warrant where the place to be searched is not a dwelling place:<br />a. There should be no unnecessary hindrance on the government’s drive to prevent smuggling and other frauds upon the Customs;<br />b. To render effective and efficient the collection of import and export duties due the State, which enables the government to carry out the functions it has been instituted to perform (Jao, et al., v. Court of Appeals, et al., and companion case, 249 SCRA 35, 43); and<br />c. The doctrine of primary jurisdiction.<br /><br /> 32. Searches without warrant of automobiles is also allowed for the purpose of preventing violations of smuggling or immigration laws, provided such searches are made at borders or ‘constructive borders’ like checkpoints near the boundary lines of the State. (Caballes v. Court of Appeals, et al., G.R. No. 136292, January 15, 2002)<br /><br />33. A peace officer or a private person may, without warrant, arrest a person:<br /> (a) When in his presence, the person to be arrested has committed, is actually committing or is attempting to commit an offense<br /> (b) When an offense has in fact just been committed, and he has probable cause to believe based on personal knowledge of facts or circumstances that the person to be arrested has committed it; and<br /> (c) When the person to be arrested is a prisoner who has escaped from a penal establishment or place where he is serving final judgment or is temporarily confined while his case is pending, or has escaped while being transferred from one confinement to another.<br />In cases falling under paragraphs (a) and (b) above, the person arrested without a warrant shall be forthwith delivered to the nearest police station or jail and shall be proceeded against in accordance with section 7 of Rule 112. (Sec. 5, Rule 113, ROC) <br /> <br /> 34. Kinds of warrantless arrest:<br /> a. Arrest "in flagrante delito" under Sec. 5 (a), Rule 113, ROC;<br /> b. Arrest in "hot pursuit" under Sec. 5 (b), and (c), Rule 113, ROC.<br /><br /> 35. Requisites for valid in flagrante warrantless arrest.<br /> a. The person to be arrested must execute an overt act indicating that he<br /> 1) has just committed,<br /> 2) is actually committing, or<br /> 3) is attempting to commit a crime; and<br /> b. Such overt act is done in the prescience or within the view of the arresting officer. (People v. Molina, G.R. No. 133917, February 19, 2001)<br /><br /> 36. A buy-bust operation, normally preceded by surveillance, is an effective mode of apprehending drug pushers and, if carried out with due regard to constitutional and legal safeguards, deserves judicial sanction.<br /> A warrant of arrest is not essential because the violator is caught in flagrante delicto. Searches made incidental thereto are valid. (People v. Gonzales, G.R. No. 113255-56, July 19, 2001)<br /><br /> 37. Where the police saw the gun tucked in the accused’s waist when he stood up, the gun was plainly visible. No search was conducted as none was necessary. Since the accused could not show any license for the firearm, whether at the time of his arrest or thereafter, he was in effect committing a crime in the presence of the police officers. No warrant of arrest was necessary. (People v. Go, G.R. Nos. 116001 & 123943, March 14, 2001)<br /><br /> 38. Personal knowledge of facts” in warrantless arrest must be based upon probable cause, which means an actual belief or reasonable ground of suspicion.<br /> Thus, there is no “personal knowledge of facts” where the police officers merely relied on information given to them by others such as: a report of the killing, information from a witness who saw the killing, the physical description given of the last man who saw the victim fitting the person arrested and information where this man lived. (People v. Cubcubin, Jr. G.R. No. 136267, July 10, 2001)<br /> The personal knowledge of facts or circumstances must convincingly be indicative or constitutive of probable cause. (People v. Chua Ho San, 308 SCRA 432 cited in People v. Molina, G.R. No. 133917, February 19, 2001)<br /><br /> 39. Probable cause means an actual belief or reasonable grounds of suspicion. <br /> The grounds of suspicion are reasonable when, in the absence of actual belief of the arresting officer, the suspicion that the person to be arrested is probably guilty of committing the offense, is based on actual facts, i.e. supported by circumstances sufficiently strong in themselves to create the probable cause of guilt of the person to be arrested. A reasonable suspicion therefore must be founded on probable cause, coupled with good faith on the part of the peace officers making the arrest. (People v. Doria 301 SCRA 668 cited in People v. Molina, G.R. No 133917, February 19, 2001)<br /><br /> 40. As applied to in flagrante delicto arrests, it is settled that, “reliable information” alone, absent any overt act indicative of a felonious enterprise in the presence and within view of the arresting officers, are not sufficient to constitute probable cause that would justify an in flagrante delicto arrest. (People v. Molina, G.R. No. 133917, February 19, 2001)<br /> <br /> 41. There was no valid in flagrante delito or hot pursuit arrest where there is lack of personal knowledge on the part of the arresting officer, or an overt physical act on the part of the accused, indicating that a crime had just been committed, was being committed or was going to be committed. (Malacat v. Court of Appeals, G.R. No. 123595, December 12, 1997)<br /><br /> 42. For warrantless arrest to be valid there must be compliance with the element of immediacy between the time of the commission of the offense and the time of the arrest. Warrantless arrests made within shorter periods like ten (10) days from commission considered as illegal. (People v. Salavaria, G.R. No. 104663, July 24, 1997)<br /> <br /> 43. Remedy for unlawful arrest.<br /> <br /> a. Motion for the quashal of the warrant;<br /> b. Motion for reinvestigation.<br /> <br /> 44. Failure to challenge the validity of the arrest and search, as well as the admission of the evidence obtained thereby, is considered a waiver of the constitutional rights, particularly against unreasonable searches and seizures. (People v. Cuison, et al., G.R. No. 109287, April 18, 1996)<br /><br /> 45. Any irregularity attendant to the arrest was cured by voluntary submission to the jurisdiction of the trial court upon entering a plea and participation during the trial. (People v. Tumaneng, G.R. No. 117624, December 4, 1997)<br /> Failure to question the legality of the arrest before arraignment is deemed a waiver of such defense. (People v. Deang, et al., G.R. No. 128045, August 24, 2000<br /><br /> 46. The filing of charges and the subsequent issuance of a warrant of arrest against a person invalidly detained will cure the defect of that detention or at least deny him the right to be released because of such defect. (The minor Larranaga, et al., v. Court of Appeals, et al., G.R. No. 130644, March 13, 1998)<br /><br /> 47. Bail not a bar to objections on illegal arrest, lack of or irregular preliminary investigation. (Sec. 26, Rule 114, ROC)<br /><br /> (1) PRIVACY OF COMMUNICATION<br /><br /> 1. The inviolability of the right of privacy of communication and correspondence is applicable not only against the government but also acts of private individuals as well. (Zulueta v. Court of Appeals, 253 SCRA 699)<br /><br /> (2); (3) “FRUIT OF THE POISONED TREE” DOCTRINE<br /><br /> 1. Any evidence in violation of the right against unreasonable searches and seizures under Section 2, Article III, shall be inadmissible for any purpose in any proceeding. (Sec. 3(2), Article III, 1987 Constitution)<br /> <br />2. Admission of evidence procured without counsel not violative of due process in customs search and seizure proceedings because the protection does not extend to administrative proceedings but only to criminal proceedings. (Feeder International Line, PTS, Ltd., 197 SCRA 842)<br /><br /> 3. The prohibition against warrantless searches applies to unwarranted intrusion by the government and does not operate as a restraint upon private individuals. (People v. Marti, 193 SCRA 57) <br /><br /> (4) FREEDOM OF SPEECH, PRESS, RIGHT TO PEACEABLY ASSEMBLE<br /><br /> 1. An association of mass media (print and ratio-TV broadcast) cannot be compelled by an advertiser to accept an advertisement which it believes to be offensive to women.<br /> The guarantee of the freedom of the press and speech is a limitation on state action and not on the action of private parties. [Lloyd Corporation v. Tanner, 407 U.S. 551 (1972)]<br /> The mass media are private enterprises, and their refusal to accept any advertisement does not violate the freedom of the press and speech. ]Times-Picayune Publishing Company v. United States, 345 U.S. 594 (1953); Columbia Broadcasting System, Inc. v. Democrat Control Committee, 412 U.S. 94 (1973)]<br /> :2. Government nominees in a private corporation may not vote to block use of the corporate funds for advertising of a perceived offensive promotion because this is a threat to the freedom of speech of the advertiser which is constitutive of prior restraint. <br /> The government nominees being part of the State are bound by the freedom of speech protection which extends to commercial advertisements. [Metromedia, Inc. v. San Diego, 453 U.S. 490 (1981)] The mere fact that an advertisement is offensive cannot justify its suppression. (Carey v. Population Services International, 431 U.S. 678 (1977)]<br /><br /> 3. People power may be defined as the power of the people to peaceably assemble in great numbers in order to effect a change in political leadership. <br /> It is an extra-constitutional act of the people to directly exercise the sovereignty that resides in them.<br /> <br /> 4. Constitutional provisions considered by some authorities as implementing people power: a. No law shall be passed abridging the right of the people to peaceably assemble and petition the government for redress of grievances. (Art. III, Sec. 4, 1987 Constitution)<br /> b. Congress shall provide for a system of initiative and referendum. (Article VI, Sec. 32, Ibid.)<br /> c. The right of the people and their organizations to effective and reasonable participation at all levels of social, political, and economic decision-making shall not be abridged. The State shall, by law, facilitate the establishment of adequate consultation mechanisms. (Art. XIII, Sec. 16, Ibid.)<br /><br /> 5. B.P. Blg. 880 is valid but the use of calibrated preventive response (CPR) insofar as it would purport to differ from or be in lieu of maximum tolerance is null and void. <br /> Maximum tolerance is for the protection and benefit of all rallyists and is independent of the conduct of the expression in the rally. The law neither recognizes nor allows the use of CPR. (BAYAN, et al., v. Ermita, etc., et al., G.R. No. 169838, April 25, 2006, and companion cases)<br /><br /> 6. B.P.Blg.880, The Public Assembly Act, is not an absolute ban on public assemblies but a restriction that simply regulates the time, place and manner of assemblies. It refers to all kinds of public assemblies that would use public places and plazas.<br /> The reference to “lawful cause” does not make it content-based because assemblies really have to be for “lawful causes” otherwise they would not be “peaceful” and entitled to protection. Neither are the words “opinion,” “protesting,” and “influencing” in the definition of public assembly content based since they can refer to any subject. The words ”petitioning the government for redress of grievances” came from the wording of the constitution, so its use cannot be avoided. (BAYAN, et al., v. Ermita, etc., et al., G.R. No. 169838, April 25, 2006, and companion cases)<br /><br /> 7. Requirement to hold permit to hold rally not prior restraint on freedom of speech and assembly. What is regulated is the time, place, and manner of holding the public assembly. For prior restraint to apply what must be regulated should be the content of the speech itself. (BAYAN, et al., v. Ermita, etc., et al., G.R. No. 169838, April 25, 2006, and companion cases)<br /><br /> 8. All public plazas are venues of rallies without need for permits if the local government unit does not declare, within thirty days from the decision, what public plazas may be used for rallies without need for permits. (BAYAN, et al., v. Ermita, etc., et al., G.R. No. 169838, April 25, 2006, and companion cases)<br /><br /> 9. The application for a permit can only be denied on the ground of clear and present danger to public order, public safety, public convenience, public morals or public health. <br /> This is a recognized exception to the exercise of the rights event under the Universal Declaration of Human Rights and the International Covenant on Civil and Political Rights. (BAYAN, et al., v. Ermita, etc., et al., G.R. No. 169838, April 25, 2006, and companion cases)<br /><br /> 10. Remedy to contest denial of application for permit. The denial may be contested in an appropriate court of law. The court must decide within twenty-four (24) hours from the date of the filing. Said decision may be appealed to the appropriate court within forty-eight (48) hours after receipt of the same. In all cases, any decision may be appealed to the Supreme Court<br />.<br /> 11. Absence of a permit when required results to arrest of leader but not participants. The holding of any public assembly by any leader or organizer without having first secured a permit where a permit is required results to arrest. However, those who are not the leaders are not to be punished or held criminally liable for participating in or attending an otherwise peaceful assembly [B.P. Blg. 880, Sec. 13 (a) and 14 (a)].<br /><br /> 12. Rallyists to be stopped only if there is clear and present danger to public safety. The policy of maximum tolerance requires that rallyists should first be requested to disperse if they do not have any permits and only upon refusal may they be dispersed.<br /><br /> 5. RELIGIOUS FREEDOM<br /><br /> 1. To expel the students who are children of a religious sect because they refuse to participate in the flag ceremony which includes saluting the flag, singing the national anthem and reciting the patriotic pledge, on account of their religious beliefs is tantamount to violation of their freedom of religion (Ebralinag v. The Division Superintendent, etc., 251 SCRA 569), and the duty of the state to protect and promote the right of all citizens to quality education and make such education accessible to all.<br /> Freedom of religion cannot be impaired except upon clear showing of a clear and present danger of a substantive evil which the State has a right to prevent. The students’ refusal to participate in the flag ceremony does not pose a clear and present danger.<br /> <br /> 2. No law shall be made respecting an establishment of religion, or prohibiting the free exercise thereof. <br /> The free exercise and enjoyment of religious profession and worship, without discrimination or preference, shall forever be allowed.<br /> No religious test shall be required for the exercise of civil or political rights. (Art. III, Sec. 5, 1987 Constitution, arrangement supplied).<br /> <br /> 3. State not to intrude in purely religious matters. The Office of Muslim Affairs (OMA) must not intrude in purely religious matters by exclusively arrogating to itself the right to classify a product as halal even on the premise that the government has the power to protect and promote the Muslim Filipinos’ right to health.<br /> Classifying a food product as halal is a religious function because the standards used are drawn from the Qur’an and Islamic beliefs. By arrogating to itself the task of issuing halal certifications, the State in effect forced Muslims to accept the government’s interpretation of the Qur-an and Sunnah on halal food. (Islamic Da’Wah Council of the Philippines, Inc., et al., v. Office of the Executive Secretary, etc., et al., G. R. No. 153888, July 9, 2003)<br /><br /> 4. The preferred status is designed to protect the broadest possible liberty of conscience, to allow each man to believe as his conscience directs, to profess his beliefs, and to live as he believes he ought to live, consistent with the liberty of others and with the common good. (Islamic Da’Wah Council of the Philippines, Inc., et al., v. Office of the Executive Secretary, etc., et al., G. R. No. 153888, July 9, 2003)<br /><br /> 5. MTRCB may review but not ban the tapes on the ground that they attack other religions ‘prior restraint on speech, including religious speech, cannot be justified by hypothetical fears but only by the showing of a substantive and imminent evil which has taken the reality already on the ground.” (Iglesia ni Cristo v. Court of Appeals, et al., 259 SCRA 529)<br /> The exercise of religious freedom can be regulated by the State when it will bring about the clear and present danger of some substantive evil which the state is duty bound to prevent, i.e. serious detriment to the more overriding interest of public morals, or public welfare.<br /> Clearly the use of offensive language may tend to influence the moral development of children who easily gain access to a medium such as television.<br /><br /> 6. A fixed annual license fee on those engaged in the business of general enterprise including the sale of bibles by a religious sect is not valid and is violative of the constitutionally guaranteed freedom of religion. <br /> As a license fee is fixed in amount and unrelated to the receipts of the taxpayer, such a license fee, when applied to a religious sect is actually imposed as a condition for the free exercise of religion. <br /> A license fee “restrains in advance those constitutional liberties of press and religion and inevitably tends to suppress their exercise.”<br /><br /> 6. LIBERTY OF ABODE<br /><br /> 1. Residents in an area of imminent military operations may be forcibly evacuated without a necessity to secure a court order because the urgency of the need justifies a valid exercise of police power which takes precedence over the liberty of abode.<br /><br /> 2. The liberty of abode and of changing the same within the limits prescribed by law shall not be impaired except upon lawful order of the court. (Art. III, Sec. 6, 1st sentence, 1987 Constitution)<br /><br /> 7. RIGHT TO INFORMATION<br /><br /> 8. RIGHT TO FORM UNIONS<br /><br /> 9. JUST COMPENSATION<br /><br /> 10. IMPAIRMENT CLAUSE<br /><br /> 1. Scope of the impairment clause. A law which changes the terms of a legal contract between parties, either in the time or mode of performance, or imposes new conditions, or dispenses with those expressed or authorizes for its satisfaction something different from that provided in its term, is law which impairs the obligation of a contract and is therefore null and void. (Clemons v. Nolting, 42 Phil. 702, 717),<br />Moreover, to constitute impairment, the law must affect a change in the rights of the parties with reference to each other and not with respect to non-parties. [Philippine Rural Electric Cooperatives Association, Inc. (PHILRECA) v. The Secretary, Department of Interior and Local Government, et al., G.R. No. 143076, June 10, 2003]<br /> The non-impairment clause does not prohibit every change in existing laws. To fall within the prohibition on the impairment of obligations of contracts, the change must not only impair the obligation of the existing contract, but the impairment must be substantial. <br /><br />2. Illustration of non-impairment. Withdrawal of all tax exemption privileges under the Local Government Code did not impair the obligations imposed under the loan agreements executed by the NEA and the USAID, because the loan agreements did not provide any tax exemption in their wordings that the borrower shall pay the lender the principal amount of the loan and interest thereon, “in full, without any deduction of the tax component thereof imposed under applicable Philippine law and any tax imposed shall be paid by the borrower with funds other than the loan proceeds.” [Philippine Rural Electric Cooperatives Association, Inc. (PHILRECA) v. The Secretary, Department of Interior and Local Government, et al., G.R. No. 143076, June 10, 2003]<br /><br /> 3. The imposition of VAT on grantees of legislative franchises that are subject to a franchise tax which “shall be in lieu of all taxes” is not violative of the non-impairment clause because of the following reasons: <br /> a. Article XII, Sec. 11 of the Constitution provides that the grant of a franchise for the operation of a public utility is subject to amendment. alteration or repeal by Congress when the common good requires;<br /> b. Not only existing laws but also the reservation of essential attributes of sovereignty is read into contracts as a postulate of the legal order;<br /> c. Contracts must be understood as having been made in reference to the possible exercise of the rightful authority of the government and no obligation of contract can extend to defeat that authority;<br /> d. A lawful tax on a new subject, or an increased tax on an old one, does not interfere with a contract or impairs its obligation, within the meaning of the constitution. Even though such taxation may affect particular contracts, as it may increase the debt of one person and lessen the security of another, or may impose additional burdens upon one class and release the burdens of another, still the tax must be paid unless prohibited by the constitution, nor can it be said that it impairs the obligations of any existing contract in its true and legal sense. (Tolentino v. Secretary of Finance and its companion cases, 235 SCRA 630, 249 SCRA.628)<br /> <br /> 4. Constitutional tax exemptions, in the real sense of the term and where the non-impairment clause of the Constitution can rightly be invoked, are those agreed to by the taxing authority in contracts, such as those contained in government bonds or debentures, lawfully entered into by them under enabling laws in which the government, acting in its private capacity sheds its cloak of authority and waives its government immunity.<br /> Truly, tax exemptions of this kind may not be revoked without impairing the obligations of contracts. A franchise partakes of the nature of a grant which is not beyond the purview of the non-impairment clause.<br /> Indeed the 1987 Constitution like its precursors the 1935 and the 1973 Constitutions is explicit that no franchise for the operation of a public utility shall be granted except under the condition that such privilege shall be subject to amendment, alteration or repeal by Congress as and when the common good so requires. (Manila Electric Company v. Province of Laguna, et al., G.R. No. 131359, May 5, 1999)<br /> <br /> 11. FREE ACCESS TO COURTS<br /><br /> 12 (1) RIGHT TO REMAIN SILENT AND TO COUNSEL<br /><br /> 1. Custodial investigation is the stage of police investigation<br />a. when a person is taken into custody and<br />b. is singled out as a suspect in the commission of the crime under investigation and<br />c. the police officers begin to ask questions on<br /> 1) the suspect’s participation therein and<br />2) which tend to elicit an admission. (People v. Pavillare, et al., G.R. No. 129970, April 5, 2000)<br /><br /> 2. When mere invitation not considered as part of custodial investigation. Inviting certain individuals without singling them out as the perpetrators of the crime is not considered custodial investigation. So also, asking a single question as to whereabouts is not custodial investigation as the query was merely part of the “general exploratory stage.” (People v. Legaspi, et al., G.R. No. 117802, April 27, 2000)<br /> However, where the questioning is not a “general inquiry into an unsolved crime” but already focused on the individual as a “particular suspect,” there was already custodial investigation and he must be accorded his Miranda rights. (People v. Gamer, G.R. No. 115984, February 29, 2000)<br /><br /> 3. Police line-up not custodial investigation. The stage of an investigation wherein a person is asked to stand in a police line-up has been held to be outside the mantle of protection of the right to counsel because it involves a general inquiry into an unsolved crime and is purely investigatory in nature. It has also been held than an uncounselled identification at the police line-up does not preclude the admissibility of an in-court identification. (People v. Pavillare, et al., G.R. No. 129970, April 5, 2000)<br /><br /> 4. Taking of pictures of an accused even without the assistance of counsel is not a violation of the constitutional right against self-incrimination because it is purely a mechanical act.<br />The right proscribes the use of physical or moral compulsion to extort communications from the accused and not the inclusion of his body in evidence when it may be material. Purely mechanical acts are not included in the prohibition as the accused does not thereby speak his guilt, hence the assistance and guiding hand of counsel is not required. (People v. Gallarde, G.R. No. 133025, February 17, 2000)<br /><br /> 5. The “Miranda” rights of a person under custodial investigation. Any person under investigation for the commission of an offense shall have the right<br />a. to be informed of his right to remain silent and<br />b. to have competent and independent counsel preferably of his own choice. <br />c. If the person cannot afford the services of counsel, he must be provided with one. These rights cannot be waived except in writing and in the presence of counsel. (People v. Naag, et al., G.R. No. 123860, January 20, 2000)<br /><br /> 6. Authoritative interpretations of the Miranda rule as embodied in the above Art. III, Sec. 12 (1) require, however, that the crucial question is whether the accused has effectively waived the effectuation of these rights. Accused should be asked whether he was willing to testify even without the assistance of counsel. If he was willing to testify only with the assistance of counsel, he should be asked if he has one. If he said he wanted to have counsel but could not afford one, he should be asked if he wanted one appointed for him. If these questions are not asked there is no effective waiver of the rights to remain silent and to counsel. (People v. Naag, et al., G.R. No. 123860, January 20, 2000)<br /><br /> 7. Rationale behind Miranda warning. An uncounselled statement is presumed to be psychologically coerced. Swept into an unfamiliar environment and surrounded by intimidating figures typical of the atmosphere of police interrogation, the suspect really needs the guiding hand of counsel. (People v. Obrero, G.R. No. 122142, May 17, 2000)<br /> 8. Nature of Miranda warning. The warning contemplates “the transmission of meaningful information rather than just the ceremonial and perfunctory recitation of an abstract constitutional principle.” It is not enough for the interrogator to merely enumerate to the person his rights as provided in Sec. 12, Art. III, of the Constitution, the interrogator must also explain the effect of such provision in practical terms, e.g. what the person under interrogation may or may not do, and in a language the subject fairly understands. (People v. Ordono, et al., G.R. No. 132154, June 29, 2000)<br /> <br /> 9. The failure to inform of right to counsel during custodial investigation attains significance only if the person under investigation makes a confession in writing without the aid of counsel which is then sought to be admitted against the accused during the trial. In such a case the tainted confession is inadmissible. (Eugenio v. People of the Philippines, G. R. No. 168163, March 26, 2008)<br /> <br /> 10. During custodial investigation the the primacy of the voluntariness of the choice of counsel by the person being investigated should be respected.<br /> The officers could not replace the counsel of choice as the replacement, no matter how bright and competent, may not be considered as independent considering the relationship between them and the lawyer they have chosen. Statements thus, elicited with the assistance of the replacement lawyer is not admissible. (People v. Sahagun, 274 SCRA 208)<br /><br />11. The purpose of right to counsel during custodial investigation is premised on the presumption that the defendant is thrust into an unfamiliar atmosphere running through menacing police interrogation procedures where the potentiality for compulsion, physical or psychological is forcefully apparent. (People v. Base, G.R. No. 109773, March 30, 2000)<br /><br /> 12. Counsel during custodial investigation must be competent and independent. Ideally, a lawyer engaged for an individual facing custodial investigation (if the latter could not afford one) should be engaged by the accused (himself), or by the latter’s relatives or person authorized by him to engage an attorney or by the court, upon proper petition of the accused or person authorized by the accused to file such petition. (People v. Juanario, cited in People v. Obrero, G.R. No. 122142, May 17, 2000)<br /> The independent counsel cannot be a special counsel, public or private prosecutor, municipal attorney or counsel of the police whose interest is admittedly adverse to the accused. To allow a Station Commander of the WPD, a part of the police force would render illusory the protection given to the suspect during custodial investigation. (People v. Bedula, 232 SCRA 566 cited in People v. Obrero, G.R. No. 122142, May 17, 2000)<br /><br /> 13. Extent of assistance to be given by the competent and independent counsel. The desired role of counsel in the progress or custodial investigation is rendered meaningless if the lawyer merely gives perfunctory advice as opposed to a meaningful advocacy of the rights of the person undergoing questioning. If the advice given is so cursory as to be useless, voluntariness is impaired. (People v. Deniega cited in People v. Suela, et al., G.R. Nos. 133570-71, January 15, 2002)<br /> The lawyer should ascertain that the confession is made voluntarily and that the person under investigation fully understands the nature and the consequence of his extrajudicial confession in relation to his constitutional rights <br /> <br /> 14. True, counsel does not necessarily have to dissuade the person under investigation from confessing. But his bounden duty is to properly and fully advise his client on the nature and consequences of an extrajudicial confession. (People v. Labtan cited in People v. Suela, et al., G.R. Nos. 133570-71, January 15, 2002)<br /> <br /> 15. The lawyer is required to be present and able to advise and assist his client from the time the confessant answers the first question asked by the investigating officer until the signing of the extrajudicial confession. (People v. Labtan cited in People v. Suela, et al., G.R. Nos. 133570-71, January 15, 2002)<br /><br /> 16. Period when right to counsel arises. The protection covers the period from the time a person is taken into custody for the investigation of his possible participation in the commission of a crime or from the time he is singled out as a suspect in the commission of the offense although not yet in custody. (People v. Base, G.R. No. 109773, March 30, 2000)<br /><br /> 17. While the initial choice of the lawyer in cases where a person under custodial investigation cannot afford the services of a lawyer is naturally lodged in the police investigators, the accused really has the final choice as he may reject the counsel chosen for him and ask for another one. <br /> A lawyer provided by the investigators is deemed engaged by the accused where he never raised any objection against the former’s appointment during the course of the investigation and the accused thereafter subscribes to the veracity of his statement before the swearing officer. (People v. Gallardo, et al., G.R. No. 113684, January 25, 2000)<br /><br /> 18. Waiver of right must be in writing. The right to counsel during custodial investigation is not waived by reason of failure to make a timely objection before plea. There can only be a valid waiver of the right if such waiver is in writing and in the presence of counsel as mandated by Article III, Section 12 of the 1987 Constitution and the pertinent provisions of Republic Act No. 7438. (People v. Buluran, et al., G.R. No. 113940, February 15, 2000)<br /><br /> 19. Even if the confession of the accused is gospel truth, if it was made without the assistance of counsel, it is inadmissible in evidence regardless of the absence of coercion, or even it had been voluntarily given. (People v. Camat, et al,. G.R. No. 112262, April 2, 1996) This refers to custodial investigation only.<br /><br /> 20. Accused who was a foreign national was effectively denied his right to counsel, as he was provided with one he could not understand and communicate with concerning his defense. He was likewise denied his right to compulsory process to guarantee the availability of witness and the production of evidence on his own behalf, including the services of a qualified and competent interpreter to enable him to present his testimony. (People v. Cuison, et al., G.R. No. 109287, April 18, 1996)<br /><br /> 21. A confession to the mayor is not one made under custodial investigation but a spontaneous statement, not elicited through questioning by the authorities but given in an ordinary manner. What the Constitution bars is the compulsory disclosure of incriminating facts or confessions. <br /> The prohibition against self-incrimination are guaranteed to preclude the slightest use of coercion by the state as would lead the accused to admit something false, not to prevent him from freely and voluntarily telling the truth. (People v. Andan, G.R. No. 116437, March 3, 1997)<br /><br /> 22. The media confessions were given free from any undue influence from the police authorities. There was no coercive atmosphere in the interview made by the reporters, neither were they acting under the direction and control of the police.<br /> Finally, the Bill of Rights does not concern itself with the relation between a private individual and another individual. It lays down limitations on governmental power to protect the individual against aggression and unwarranted interference by any department of the government and its agencies. (People v. Ordono, et al., G.R. No. 132154, June 29, 2000)<br /><br /> 12 (2) NO TORTURE OR VIOLENCE<br /><br /> 12 (4) COMPENSATION FOR VICTIMS OF TORTURE<br /><br /> 13. RIGHT TO BAIL<br /><br /> 1. Bail is<br /> a. the security given<br /> b. for the release of a person<br /> c. in custody of the law,<br /> d. furnished by him or a bondsman,<br /> e. to guarantee his appearance before any court as required under the conditions hereinafter specified. (1st sentence, Sec. 1, Rule 114, ROC arrangement and numbering supplied)<br /> <br /> 2. Forms of bail:<br /> a. Corporate surety;<br /> b. Property bond;<br /> c. Cash deposit; or<br /> d. Recognizance. (2nd sentence, Sec. 1, Rule 114, ROC)<br /><br />3. The amount of bail should be high enough to assure the presence of the accused when required but no higher that is reasonably calculated to fulfil this purpose. (SPO1 Caneda, et al., v. Hon. Allan, etc., A.M. No. MTJ-01-1376, January 23, 2002)<br />To fix an amount equivalent to the civil liability of which the accused is charged of should not be allowed because bail is not intended as a punishment, nor as a satisfaction of civil liability which should necessarily await the judgment of the appellate court. (Yap, Jr., v. Court of Appeals, et al., G.R. No. 141529, June 6, 2001)<br /><br /> 4. The prohibition against requiring excessive bail is enshrined in the Constitution. <br /> The obvious rationale is that imposing bail in an excessive amount could render meaningless the right to bail. There is grim irony in an accused being told that he has a right to bail but at the same time being required to post such an exorbitant amount. <br /> As Justice Jackson once said, “a promise to the ear to be broken to the hope, a teasing illusion like a munificent bequest in a pauper’s will.” (Yap, Jr. v. Court of Appeals, et al., G.R. No. 1411529, June 6, 2001 citing De Camara v. Enage, 41 SCRA 1)<br /><br /> 5. Accused to be released only after the corresponding property or cash bond has been properly filed. (Sec. 3, Rule 114,ROC)<br /><br /> 6. No right to bail in extradition as not criminal in character. (Government of the U.S.A. v. Purganan, G. R. No. 148571, September 24, 2002)<br /><br /> 7. All persons, except those charged with offenses punishable by reclusion perpetua when evidence of guilt is strong, shall, before conviction, be bailable by sufficient sureties, or be released on recognizance as may be provided by law. The right to bails shall not be impaired even when the privilege of the writ of habeas corpus is suspended. Excessive bail shall not be required. (1987 Constition, Art. III, Sec. 13)<br /><br /> 8. All persons in custody shall be admitted to bail as a matter of right, with sufficient sureties, or be released on recognizance as prescribed by law or this Rule 114 of the Rules of Court.<br /> a. before conviction by the Metropolitan Trial Court, Municipal Trial Court, Municipal Trial Court in Cities, or Municipal Circuit Trial Court, and<br /> b, before conviction by the Regional Trial Court of an offense not punishable by death, reclusion perpetua or life imprisonment. (Sec. 4, Rule 114, ROC words not in bold supplied)<br /><br />9. There is discretionary bail granted on application upon conviction by the Regional Trial Court of an offense not punishable by reclusion perpetua or life imprisonment. <br />Should the court grant the application, the accused may be allowed provisional liberty during the pendency of the appeal under the same bail subject to the consent of the bondsman. (1st two pars., Sec. 5, Rule 114, ROC paraphrasing supplied)<br /><br />10. After conviction bail is discretionary because after a person has been tried and convicted the presumption of innocence which may be relied upon in prior applications is rebutted, and the burden is upon the accused to show error in conviction. <br />From another point of view, it may be properly argued that the probability of ultimate punishment is so enhanced by the conviction that the accused is more likely to escape if liberated on bail than before conviction …” (Francisco cited in Yap, Jr., v. Court of Appeals, et al., G.R. No. 141529, June 6, 2001)<br /><br /> 11. Instances when the court shall deny bail or cancel if already posted. If the penalty imposed by the trial court is imprisonment exceeding six (6) years, the accused shall be denied bail, or his bail shall be cancelled, upon a showing by the prosecution, with notice to the accused, of the following or other similar circumstances:<br /> a. That he is a recidivist, quasi-recidivist, or habitual delinquent, or has committed the crime aggravated by the circumstance of reiteration;<br /> b. That he has previously escaped from legal confinement, evaded sentence, or has violated the conditions of his bail without valid justification;<br /> c. That he committed the offense while under probation, parole, or under conditional pardon;<br /> d. That the circumstances of his case indicate the probability of flight if released on bail; or<br /> e. That there is undue risk that he may commit another crime during the pendency of the appeal.<br />The appellate court may, motu proprio or on motion of any party, review the resolution of the Regional Trial Court, on motion notice to the adverse party. (3rd and 4th pars., Sec. 5, Rule 114, ROC) <br /><br /> 12. A person who appealed his conviction of homicide on a murder charge to the Court of Appeals, may be denied bail by the Court of Appeals because he could be convicted of a capital offense. (Obosa v. Court of Appeals, 266 SCRA 281)<br /> <br />13. No bail shall be allowed after a judgment of conviction has become final. (1st sentence, Sec. 24, Rule 114, ROC) <br /><br />14. If after such finality of judgment of conviction, the accused applies for probation, he may be allowed temporary liberty under his bail. <br />When no bail was filed or the accused is incapable of filing one, the court may allow his release on recognizance to the custody of a responsible member of the community. In no case shall bail be allowed after the accused has commenced to serve sentence. (Sec. 24, Rule 114, ROC)<br /> 15. Bail, as a matter of right, in the amount fixed may be filed with<br /> a. the court where the case is pending, or in the absence of unavailability of the judge thereof, with<br /> b. any regional trial judge, metropolitan trial judge, municipal trial judge, or municipal circuit trial judge in the province, city, or municipality.<br /> c. If the accused is arrested in a province, city, or municipality, other than where the case is pending,<br /> 1) bail may be filed with any regional trial court of said place, or,<br /> 2) if no judge thereof is available, with any metropolitan trial judge, municipal trial judge or municipal circuit trial judge thereto. (Sec. 17, Rule 114, ROC arrangement, numbering and underlining supplied) <br /><br /> 15. Whenever the grant of bail is a matter of discretion, or the accused seeks to be released on recognizance, the application can only be filed in<br /> a. the court where the case is pending, whether on preliminary investigation, trial, or appeal. (Sec. 17, Rule 114, ROC arrangement, numbering and underlining supplied) <br /><br />16. Any person who is in custody who is not yet charged in court may apply for bail with<br />a. any court in the province, city or municipality where he is held. (Sec. 17, Rule 114, ROC arrangement, numbering and underlining supplied) <br /><br /> 17. Duties of the trial judge where an application for bail is filed.<br /> a. Give reasonable notice to the prosecutor or require him to submit his recommendation. (Sec. 18, Rule 114, ROC paraphrasing supplied)<br /> b. Conduct a hearing of the application for bail regardless of whether or not the prosecution refuses to present evidence to show that the guilt of the accused is strong for the purpose of enabling the court to exercise its sound discretion (Secs. 7 and 8, supra)<br /> c. Decide whether the evidence of guilt of the accused is strong based on the summary of evidence of the prosecution.<br /> d. If the guilt of the accused is not strong, discharge the accused upon the approval of the bailbond. (Sec. 19, supra) (Basco v. Judge Rapatalo, etc., A.M. No. RTJ-96-1335, March 5, 1997)<br /><br /> 18. Hearing is mandatory when accused is charged with an offense punishable by reclusion perpetua, or life imprisonment.<br /> The judge shall conduct a hearing whether summary or otherwise , not only to take into account the guidelines set forth under the Rules for the grant of bail, but primarily to determine the existence of strong evidence of guilt or the lack of it, against the accused, only for purposes of bail. <br /> If the evidence of guilt is not strong, bail becomes a matter of right. (People v. Hapa, G.R. No. 125698, July 19, 2001)<br /><br /> 19. Due process to be given to prosecution in application for bail. <br /> A bail application does not only involve the right of the accused to temporary liberty, but likewise the right of the State to protect the people and the peace of the community from dangerous elements. <br /> “To appreciate the strength or weakness of the evidence of guilt, the prosecution must be consulted or heard. It is equally entitled as the accused to due process.” The prosecution must be given ample opportunity to show that the evidence of guilt is strong. (People v. Hon. Antona, etc., et al., G.R. No. 137681, January 31, 2002)<br /><br /> 20. Rationale for giving due process to prosecution in bail applications. By the very nature of deciding applications for bail, it based on evidence presented by the prosecution that judicial discretion is exercised in determining whether the evidence of guilt of the accused is strong.<br /> Any order issued in the absence thereof is not a product of sound judicial discretion but of whim and caprice and outright arbitrariness. (People v. Hon. Antona, etc., et al., G.R. No. 137681, January 31, 2002)<br /><br /> 21. The evidence presented during the bail hearing shall be considered automatically reproduced at the trial, but upon motion of either party, the court may recall any witness for additional examination unless the latter is dead, outside of the Philippines or otherwise unable to testify. (2nd sentence, Sec. 8, Rule 114, ROC)<br /><br /> 8. A witness may be required to post bail.<br />If the witness is a material witness and the court, upon motion of either party, is satisfied upon proof or oath that he will not testify when required.<br /><br /> 14 (1) CRIMINAL DUE PROCESS<br /><br /> 14 (2) PRESUMPTION OF INNOCENCE<br /><br />1. It is incumbent upon the prosecution during the trial, to prove that prior to questioning, the confessant was warned of his constitutionally protected rights because the presumption of regularity of official acts does not apply during in-custody investigation. (People v. Camat, et al., G.R. No. 1122262, April 2, 1996)<br /><br /> 2. The signatures of the accused on the boxes and on the plastic bags are tantamount to uncounselled extrajudicial confessions which is not sanctioned by the Bill of Rights and are, therefore inadmissible as evidence.<br />The fact that all of the accused are foreign nationals does not preclude application of the "exclusionary rule" because the constitutional guarantee embodied in the Bill of Rights are given and extends to all persons, both aliens and citizens. (People v. Wong Chuen Ming, et al., G.R. Nos. 112801-11, April 12, 1996) <br /><br /> 14 (2) RIGHT TO COUNSEL DURING TRIAL<br /><br /> 14 (2) RIGHT TO SPEEDY TRIAL<br /><br /> 1. In all criminal prosecutions, the accused shall enjoy the right to have a speedy, impartial and public trial. [Art. III, Sec. 14 (2), 1987 Constitution]<br /><br /> 2. Right to speedy trial guaranteed under the Speedy Trial Act of 1998. If the accused is not brought to trial within the time limit required by Section 1 (g), Rule 116 and Section 1, the information may be dismissed on motion of the accused on the ground of denial of his right to speedy trial. <br /> The accused shall have the burden of proving the motion but the prosecution shall have the burden of going forward with the evidence to establish the exclusion of time under section 3 of this rule. The dismissal shall be subject to the rules on double jeopardy.<br /> Failure of the accused to move for dismissal prior to trial shall constitute a waiver of the right to dismiss under this section. (Sec. 9, Rule 119, ROC)<br /> <br /> 3. Period for arraignment under Sec. 1 (g), Rule 116, Rules of Court. Unless a shorter period is provided by special law or Supreme Court circular, the arraignment shall be held within thirty (30) days from the day the court acquires jurisdiction over the person of the accused. The time of the pendency of a motion to quash or for a bill of particulars or other causes justifying the suspension of the arraignment shall be excluded in computing the period.<br /><br />4. Commencement of trial under Section 1, Rule 119. After a plea of not guilty is entered, the accused shall have at least fifteen (15) days to prepare for trial. The trial shall commence within thirty (30) days from receipt of the pre-trial order.<br /><br />5. Time under Sec. 6, Rule 119. The time limit from arraignment to trial is starting September 16, 2000 = 80 days. (Sec. 6, Rule 119, ROC)<br /><br />6. Time limit for trial: In criminal cases involving persons charged of a crime, except those subject to the Rules on Summary Procedure, or where the penalty prescribed by law does not exceed six (6) months imprisonment, or a fine of One thousand pesos (P1,000.00) or both, irrespective of other imposable penalties, the justice or judge shall, after consultation with the public prosecutor and the counsel for the accused, set the case for continuous trial on a weekly or other short-term trial calendar at the earliest possible time so as to ensure speedy trial. (Sec. 6, R.A. No. 8493)<br /> In no case shall the entire trial period exceed one hundred eighty (180) days from the first day of trial, except as otherwise authorized by the Supreme Court. (last sentence, 2nd par., Sec. 2, Rule 119, ROC)<br /><br /> 7. Mere mathematical reckoning of time involved not sufficient in determining violation of right to speedy trial. <br /> It is violated only when the proceedings is attended by vexatious, capricious, and oppressive delays or when unjustified postponements of the trial are asked and secured, or when without cause or unjustifiable motive, a long period of time is allowed to lapse without the party having his case tried (Ty-Dazo, et al., v. Sandiganbayan, G.R. No. 143885-86, January 21, 2002) such as political motivation playing a vital role in activating and propelling the prosecutorial process; that there was blatant departure from the established procedure prescribed by law for the conduct of the preliminary investigation; and that the long delay in resolving the preliminary investigation could not be justified on the basis of the facts on record. (Ibid, citing Tatad v. Sandiganbayan, 159 SCRA 70)<br /> <br /> 8. The right to speedy trial is a relative one, subject to reasonable delays and postponements arising from illness, medical attention, and body operations, as in the present case where it was duly proven that complainant had to undergo a carotid operation. <br /> Accused persons sometimes forget that those who are aggrieved also have rights. What offends the right to speedy trial are unjustified postponements which prolong trial for an unreasonable length of time. (de Zuzuarregui, Jr. v. Judge Rosete, etc., A.M. No. MTJ-02-1426, May 9, 2002)<br /><br /> 9. A previous decision or judgment, while admissible in evidence, may only prove that an accused was previously convicted of a crime. It may not be used to prove that the accused is guilty of a crime charged in a subsequent case, in lieu of the requisite evidence proving the commission of the crime, as said previous decision is hearsay. <br /> Every conviction must be based on the findings of fact made by a trial court according to its appreciation of the evidence before it. A conviction may not be based merely on the findings of fact of another court, especially where what is presented is only its decision without the transcript of the testimony of the witnesses who testified therein and upon which the decision is based. (People v. Ortiz-Miyake, G.R. No. 115338-39, September 16, 1997)<br /> <br /> 10. In all criminal prosecutions, the accused shall enjoy the right to meet the witness face to face. [Art. III, Sec. 14 (2), 1987 Constitution]<br /><br />11. Purpose of the right to confront witnesses:<br /> a. To secure the opportunity of cross-examination; and<br /> b. To allow the judge to observe the deportment and appearance of the witness while testifying. (People v. Ortiz-Miyake, G.R. No. 115338-39, September 16, 1997)<br /><br /> 15. SUSPENSION OF THE WRIT OF HABEAS CORPUS<br /><br /> Refer to Article VII. EXECUTIVE DEPARTMENT, infra.<br /><br /> 16. RIGHT TO SPEEDY DISPOSITION OF CASES<br /><br /> 17.RIGHT AGAINST SELF-INCRIMINATION<br /> <br /> 1. The right against self-incrimination. No person shall be compelled to be a witness against himself. (Art. III, Sec. 17, 1987 Constitution)<br /> This right is recognized under the Rules on Evidence, which provides that, it is the right of a witness not to give an answer which will tend to subject him to a penalty for an offense unless otherwise provided by law. [Sec. 3 (4), Rule 132, ROC]<br /> <br />2. The human body could be used as evidence without violating the right. Mechanical acts without the use of intelligence do not fall within the scope of the protection. Some of the acts which are not covered by the right of self-incrimination are the following:<br />a. Fingerprinting, photographing and paraffin testing, physical examination. (U.S. v. Tang, 23 Phil. 145)<br />b. Physical examination of a woman accused of adultery to determine if she is pregnant. (U.S. v. On Suy Hon, 36 Phil. 735; Villaflor v. Summers, 41 Phil. 62)<br />c. Undergoing ultra-violet rays examination to determine presence of fluorescent powder on the hands. (People v. Tranca, 35 SCRA 455)<br />c. Subpoena directing government officials to produce official documents or public records in their custody.<br />d. Fitting the accused foot over a foot print, putting on a pair of trousers, shoes, etc.<br /><br /> 3. The right against self-incrimination include protection against being compelled to provide specimens of the accused’ handwriting.<br /> Since the provision prohibits compulsory testimonial evidence, it does not matter whether the testimony is taken by oral or written means as either way it involves the use of intellectual faculties. <br /> The purpose of the privilege is to avoid and prohibit thereby the repetition and recurrence of compelling a person, in a criminal or any other case, to furnish the missing evidence necessary for his conviction. (Bermudez v. Castillo, Per Rec. No. 714-A, July 26, 1937; Beltran v. Samson, G. R. No. 32025, September 23, 1929) <br /><br />4. An accused is exempt from being compelled to be a witness against himself [Sec. 1 (e), Rule 115, ROC) hence he may refuse to take the witness stand.<br /> <br /> 5. Ordinary witness who is NOT the accused may be compelled to testify. However, he could claim the privilege against self-incrimination and refuse to answer only as each question requiring an incriminatory answer is propounded to him. (Badiong v. Gonzales, 94 SCRA 906)<br /><br /> 18 (1) NO DETENTION FOR POLITICAL BELIEFS<br /><br /> 18 (2) NO INVOLUNTARY SERVITUDE<br /><br /> 19 (1) NO EXCESSIVE FINES AND CRUEL AND UNUSUAL PUNISHMENT<br /><br /> 19 (2) NO DEGRADING PUNISHMENT<br /><br /> 20. NO IMPRISONMENT FOR DEBT<br /><br /> 21. NO DOUBLE JEOPARDY<br /><br />1. The concept of double jeopardy. When an accused<br /> a. has been convicted or acquitted, or<br /> b. the case against him dismissed or otherwise terminated<br /> 1) without his consent<br /> 2) by a court of competent jurisdiction,<br /> 3) upon a valid complaint or information or other formal charge sufficient in form and substance to sustain a conviction and<br /> c. after the accused had pleaded guilty to the charge,<br /> d. the conviction or acquittal of the accused or the dismissal of the case shall be a bar to another prosecution<br /> 1) for the offense charged, or<br /> 2) for any attempt to commit the same or frustration thereof, or<br /> 3) for any offense which necessarily includes or is necessarily included in the offense charged in the former complaint or information. (1st par., Sec. 7, Rule 117, ROC numbering and arrangement supplied)<br /><br /> <br /> 2. Related protection afforded by double jeopardy:<br /> a. Against a second prosecution for the same offense after acquittal.<br /> b. Against a second prosecution for the same offense after conviction.<br /> c. Against multiple punishments for the same offense. (People v. dela Torre, G.R. Nos. 137953-58, April 11, 2002)<br /><br /> 3. Purposes of protection against double jeopardy.<br /> a. It prevents the State from using its criminal processes a an instrument of harassment to wear out the accused by a multitude of cases with accumulated cases.<br /> b. It also serves the additional purpose of precluding the State, following an acquittal, from successively retrying the defendant in the hope of securing a conviction.<br /> c. Finally, it prevents the State, following conviction, from retrying the defendant again in the hope of securing a greater penalty. (People v. dela Torre, G.R. Nos. 137953-58, April 11, 2002)<br /><br />4. Requisites for double jeopardy.<br /> a. The first jeopardy must have attached prior to the second.<br /> b. The first jeopardy must have been validly terminated.<br />c. The second jeopardy must be<br />1) for the same offense, or<br />2) the second offense includes or is necessarily included in the offense charged in the first information, or is<br />3) an attempt to commit the same or is a frustration thereof. (Cudia v. Court of Appeals, et al., G.R. No. 110315, January 16, 1998)<br /> <br />5. Proof that first jeopardy has attached.<br /> a. Court of competent jurisdiction;<br /> b. Valid complaint or information;<br /> c. Arraignment;<br /> d. Valid plea; and<br /> e. The defendant was acquitted or convicted or the case was dismissed or otherwise terminated without the express consent of the accused. (Cudia v. Court of Appeals, et al., G.R. No. 110315, January 16, 1998)<br /> <br /> 6. The only instance when double jeopardy will not attach is when the trial court acted with grave abuse of discretion amounting to lack or excess of jurisdiction due to a violation of due process, i.e., that the prosecution was denied the opportunity to present its case, in which case certiorari may be resorted to cure an abusive denial. <br /> In that extraordinary proceeding it must be clearly demonstrated that the trial court blatantly abused its authority to a point so grave as to deprive it of its very power to dispense justice. (People v. Sandiganbayan, et al., G.R. No. 140633, February , 2002)<br /><br />7. Inasmuch as the acquittal of the accused by the court a quo was done without regard to due process of law, the same is null and void. It is as if there is no acquittal at all, and the same cannot constitute a claim for double jeopardy.<br /> In rendering the judgment of dismissal, the trial judge acted without or in excess of jurisdiction, for a judgment which is void for lack of due process is equivalent to excess or lack of jurisdiction. Indeed, “jurisdiction” is the right to hear and determine, not to determine without hearing. (Merciales v. Hon. Court of Appeals, et al., G.R. No. 124171, March 18, 2002)<br /><br />8. Appeal by the State seeking increased penalty constitutes double jeopardy. (People v. dela Torre, G.R. Nos. 137953-58, April 11, 2002)<br /><br /> 9. Instances where the conviction of the accused shall not be a bar to another prosecution for an offense which necessarily includes the offense charged in the former complaint or information:<br /> a. the graver offense developed due to supervening facts arising from the same act or omission constituting the former charge;<br /> b. the facts constituting the graver charge became known or were discovered only after a plead was entered in the former complaint or information or<br />c. the plea of guilty to the lesser offense was made without the consent of the prosecutor and of the offended party except when more than one offense is charged unless a single punishment for various offenses is prescribed by law, as provided in section 1 (f) of Rule 116. (last par., Sec. 7, Rule 117, words not in bold supplied)<br /><br /> 21. NO EX POST FACTO LAW<br /><br /> 1. Ex post facto law is a law which penalizes a person for having committed an act which was not punishable at the time of its commission. Such retroactive application violates a person’s right to due process.<br /><br /> 2. An ex post facto law has been defined as one:<br /> a. which makes criminal an act done before the passage of the law and which was innocent when done, and punishes such action; or<br /> b. which aggravates a crime, or makes it greater than it was, when committed; or<br /> c. which changes the punishment and inflicts a greater punishment than the law annexed to the crime when committed; or<br /> d. which alters the legal rules of evidence, and authorizes conviction upon less or different testimony than the law required at the time of the commission of the offense in order to convict the defendant; or<br /> e. which assumes to regulate civil rights and remedies only, but in effect imposes penalty or deprivation of a right for something which when exercised was lawful; or<br /> f. which deprives a person accused of a crime of some lawful protection to which he has become entitled, such as the protection of a former conviction or acquittal, or a proclamation of amnesty. (Presidential Ad Hoc Fact-Finding Committee on Behest Loans, etc., v. Desierto, etc., et al., G.R. No. 145184, March 14, 2008 citing various cases)<br /> <br /> 3. The constitution proscription of ex post facto laws is aimed against the restrospectivity of penal laws. (Presidential Ad Hoc Fact-Finding Committee on Behest Loans, etc., v. Desierto, etc., et al., G.R. No. 145184, March 14, 2008)<br /><br /> 4. Penal laws are acts of the legislature which prohibit certain acts and establish penalties for their violations; or those that define crimes, treat of their nature and provide for their punishment. (Presidential Ad Hoc Fact-Finding Committee on Behest Loans, etc., v. Desierto, etc., et al., G.R. No. 145184, March 14, 2008 citing Orlando L. Salvador v. Placido L. Mapa, et al., G. R. No. 135080, November 28, 2007, 539 SCRA 34) <br /> A law is also penal if it prescribes a burden equivalent to a criminal penalty (e.g. disqualification from the practice of a profession) even if such burden is imposed in an administrative proceeding. (Pascual v. Board of Medical Examiners, 28 SCRA 344)<br /><br /> 5. The prohibition against the enactment of an ex post facto law does not apply to<br /> a. an extradition treaty because the same is not a penal law. (Wright v. Court of Appeals, 235 SCRA 341)<br /> b. the Presidential Adm. Order No. 13 creating the Presidential Ad Hoc Fact-Finding Committee on Behest Loans because it merely provides for its composition and functions,<br /> c. the Presidential Memorandum Order No, 61 which provides the frame of reference in determining the existence of behest loans because not being penal laws, they cannot be characterized as ex post facto laws. (Presidential Ad Hoc Fact-Finding Committee on Behest Loans, etc., v. Desierto, etc., et al., G.R. No. 145184, March 14, 2008)<br /><br /> 6. A bill of attainder is a law that inflicts punishment without a trial, substituting the legislative act for a judicial determination of guilt. It violates the right s of the accused to be presumed innocent and to seek a proper remedy before a court of law.<br /> <br /> Art. IV. CITIZENSHIP<br /><br /> 1. “The following are citizens of the Philippines:<br /> (1) Those who are citizens of the Philippines at the time of the adoption of the 1987 Constitution;<br /> (2) Those whose fathers or mothers are citizens of the Philippines;<br /> (3) Those born before January 17, 1973, of Filipino mothers, who elect Philippine citizenship upon reaching the age of majority; and<br /> (4) Those who are naturalized in accordance with law.” (Sec. 1, Art. IV, 1987 Philippine Constitution)<br /><br /> 2. Marriage does not result to loss of citizenship. Citizens of the Philippines who marry aliens shall retain their citizenship, unless by their act or omission they are deemed, under the law, to have renounced it. (Sec.4, Art. IV, 1987 Philippine Constitution)<br /><br /> 3. Loss of Filipino citizenship results from taking an oath of allegiance to follow the citizenship of an alien husband. (Sec. 1 [3], Commonwealth Act No. 63) <br /> <br /> 4. Only natural born citizens are qualified to retain or reacquire Philippine citizenship. Any provision of law to the contrary notwithstanding, natural born citizens of the Philippines who have lost their Philippine citizenship by reason of their naturalization as citizens of a foreign country are hereby deemed to have re-acquired Philippine citizenship upon taking an oath of allegiance to the Republic of the Philippines. (Sec. 3, Rep. Act No. 9225, the Citizenship Retention and Re-Acquisition Act of 2003)<br /> Natural born citizens of the Philippines who, after the effectivity of this Act, become citizens of a foreign country, shall retain their Philippine citizenship upon taking the aforesaid oath. (Ibid.)<br /><br /> 5. Derivative Citizenship under Rep. Act No. 9225, the Citizenship Retention and Re-Acquisition Act of 2003. <br /> The unmarried child, whether legitimate, illegitimate or adopted, below eighteen (18) years of age, of those who re-acquire Philippine citizenship under this Act shall be deemed citizens of the Philippines. (Sec. 4, Rep. Act No. 9225)<br /><br /> 6. Civil and political rights under Rep. Act No. 9225, the Citizenship Retention and Re-Acquisition Act of 2003. Those who retain or reacquire Philippine citizenship under this Act shall enjoy civil and political rights and be subject to all attendant liabilities and responsibilities under existing laws of the Philippines and the following conditions:<br /> 1) Those intending to exercise their right of suffrage must meet the requirements under Section 1, Article V of the Constitution, Republic Act No. 9189, otherwise known as ”The Overseas Absentee Voting Act of 2003” and other existing laws;<br /> 2) Those seeking elective public office in the Philippines shall meet the qualifications for holding such public office as required by the Constitution and existing laws and, at the time of the filing of the certificate of candidacy, make a personal and sworn renunciation of any and all foreign citizenship. (Sec. 5, Rep. Act No. 9225)<br /><br /> 7. Persons who despite having reacquired or retained their Filipino citizenship could cannot exercise their right to vote or be elected or appointed to any public office in the Philippines:<br /> a. Candidates for or are occupying any public office in the country of which they are naturalized citizens;<br /> b. Are in active service as commissioned or noncommissioned officers in the armed forces of the country which they are naturalized citizens. (Sec. 5, Rep. Act No. 9225)<br /><br /> Art. V. SUFFRAGE<br /><br /> Refer to discussion below.<br /><br /> Art. VI. LEGISLATIVE DEPARTMENT<br /><br /> 1. No person shall be a Senator unless<br /> a. he is a natural-born citizen of the Philippines, and, <br /> b. on the day of his election, is at least thirty-five (35) years of age,<br /> c. able to read and write,<br /> d. a registered voter, and<br /> e. a resident of the Philippines for not less than two years immediately preceding the day of the election. (Sec. 3,Art. VI, 1987 Philippine Constitution)<br /><br /> 2. No person shall be a Member of the House of Representatives unless<br /> a. he is a natural-born citizen of the Philippines, and, <br /> b. on the day of his election, is at least twenty-five (25) years of age,<br /> c. able to read and write,<br /> d. except the party-list representative, a registered voter in the district in which he shall be elected, and<br /> e. a resident thereof for a period not less than one year immediately preceding the day of the election. (Sec. 6, Art. VI, 1987 Philippine Constitution)<br /><br /> 3. Natural-born Filipino who becomes a naturalized alien is restored to his original status of being a natural-born Filipino by virtue of his repatriation. (Bengson v. House of Representatives Electoral Tribunal, 357 SCRA 545)<br /><br /> 4. Function of the Senate Electoral Tribunal and the House of Representatives Electoral Tribunal. The Senate and the House of Representatives shall each have an Electoral Tribunal which shall be the sole judge of all contests relating to the election, returns, and qualifications of their respective Members. (Art. VI, Sec. 17, 1st sentence)<br /><br /> 5. Composition of the Senate Electoral Tribunal and the House of Representatives Electoral Tribunal. Each Electoral Tribunal shall be composed of nine Members, three of whom shall be Justices of the Supreme Court to be designated by the Chief Justice, and the remaining six shall be Members of the Senate or the House of Representatives, as the case may be, who shall be chosen on the basis of proportional representation from the political parties and the parties or organizations registered under the party-list system represented therein. The senior Justice in the Electoral Tribunal shall be its Chairman. (Art. VI, Sec. 17, 2nd and 3rd sentence)<br /><br /> 6. Formulae for allocating seats for the party-list representatives:<br /> a. The twenty percent allocation;<br /> b. The two percent threshold; and<br /> c. The three-seat limit.<br /><br /> 7. Twenty percent allocation limit for distributing seats for party-list representatives. The total number of party-list representatives should not be more than twenty percent of the entire membership of the House of Representatives. [Art. VI, Sec. 5 (3); Veterans Foundation Party v. COMELEC, 342 SCRA 244 (2000)]<br /><br /> 8. Two percent threshold limitation for allocating seats for party-list representatives. Only the party which received at least two per cent of the total votes cast for the party-list are entitled to have a seat in the House of Representatives. [Rep. Act No. 7941, Sec. 11 (b)]<br /> To have a meaningful representation, the elected party-list representative must have the mandate of a sufficient number of people. (Veterans Foundation Part, supra)<br /><br /> 9. Three-seat limit for party-list representatives. The qualified party-lists shall have a maximum of three (3) seats in the House of Representatives [Rep. Act No. 7941, Sec. 11 (b)] so that no single group will dominated the party-list seats. [Veterans Foundation Party v. COMELEC, 342 SCRA 244 (2000)]<br /> Additional seats to which a qualified party list is entitled are determined by the proportion of the total number of votes it obtained in relation to the total number of votes obtained by the party with the highest number of votes to maintain proportional representation. While representation in the party-list system is proportional, a party is entitled to a maximum of three (3) seats regardless of the number of votes it actually obtained. (Veterans Foundation Part, supra)<br /><br /> 10. Disqualifications attendant to being a Senator or a Member of the House of Representatives engaging in business, or engaging in the practice of a profession:<br /> a. To notify the House or Senate in the filing of a proposed legislation of which they are the authors where there is a potential conflict of interest and upon assumption of office, to make a full disclosure of their financial and business interests. (Sec. 12, Art. VI, 1987 Philippine Constitution) It is therefore a given that they should not also propose bills where there would be a potential conflict of interest, neither should they participate in the deliberation of bills, even if they are not the authors thereof, where there is a potential conflict of interest.<br /> b. Not to hold any other office or employment in the government, or any subdivision, agency, or instrumentality thereof, including government-owned or controlled corporations or their subsidiaries, during is term without forfeiting his seat. (1st sentence, Sec. 13, Art. VI, Ibid.)<br /> c. Not to be appointed to any office which may have been created or the emoluments thereof increased during the term for which he was elected. (2nd sentence, Sec. 13, Art. VI, Ibid.)<br /> d. Not to personally appear as counsel before any court of justice or before the Electoral Tribunals, or quasi-judicial and other administrative bodies. (1st sentence, Sec. 14, Art. VI, Ibid.)<br /> e. Not to be directly or indirectly, interested financially in any contract with, or in any franchise or special privilege granted by Congress, or ay subdivision, agency, or instrumentality thereof, including any government-owned or controlled corporation, or its subsidiary, during the term of his office. (2nd sentence, Sec. 14, Art. VI, Ibid.)<br /> f. Not to intervene in any manner before any office of the Government for his pecuniary benefit or where he is called upon to act on account of his office. (last sentence, Sec. 14,Art.VI, Ibid.)<br /><br /> 11. Scope of parliamentary immunity. “A Senator or Member of the House of Representatives shall, in all offenses punishable by not more than six years imprisonment, be privileged from arrest while the Congress is in session. No Member shall be questioned nor be held liable in any other place for any speech or debate in the Congress or in any committee thereof.” (Sec. 11, Art. VI, 1987 Philippine Constitution)<br /><br /> 12. Two kinds of legislative or congressional inquiry when persons may be invited by Congress to appear before it:<br /> a. Inquiry in aid of legislation; or<br /> b. Inquiry in the exercise of oversight function of Congress. appearing in or affected by such inquiries are respected. (Neri v. Senate Committee on Accountability of Public Officers and Investigations, et al., G. R. No. 180643, March 25, 2008)<br /><br /> 13. Persons may be invited in aid of legislation. “The Senate or the House of Representatives or any of its committees may conduct inquiries in aid of legislation in accordance with its duly published rules of procedure. The rights of persons appearing in or affected by such inquiries shall be respected.” (Sec. 21, Art. I, 1987 Philippine Constitution) <br /> 14. The exercise of the oversight function of Congress. The heads of the different departments (cabinet members) may be requested by either House, as the rules of such House shall provide, to appear and be heard on any matter pertaining to their departments. (Sec. 22, Art. VI, 1987 Philippine Constitution) Members of the cabinet may be invited under this authority.<br /> The oversight function of Congress may be facilitated by compulsory process only to the extent that it is performed in pursuit of legislation. (Neri v. Senate Committee on Accountability of Public Officers and Investigations, et al., G. R. No. 180643, March 25, 2008)<br /><br /> 15. Instances when Cabinet members appear before the Senate or the House of Representatives:<br /> a. Upon their own initiative, with the consent of the President of the Philippines.<br /> b. Upon the request of either House, as the rules of each House shall provide. (1st sentence, Sec. 22, Art. VI, 1987 Philippine Constitution)<br /><br /> 16. Question hour. The practice of members of the Cabinet appearing before Congress is a feature of the parliamentary system of Government where the members of the Cabinet are responsible to the parliament and may be the subject of inquiry on any matter pertaining to their departments. Thus our system of government is strongly presidential but with certain features of the parliamentary system.<br /><br /> 17. Limitations upon the exercise by Congress of the “question hour” privilege:<br /> a. If the appearance by the Cabinet member is upon his own initiative, it must always be with the consent of the President.<br /> b. If it is upon the request of either House, the invitation should be in accordance with the rules of the House making the request.<br /> c. The subject matter shall be limited only to any matter pertaining to the department of the Cabinet member, and no other.<br /> d. Written questions shall be submitted to the President of the Senate or the Speaker of the House of Representatives at least three days before their scheduled appearance.<br /> e. Interpellations shall not be limited to the written questions, but may cover matters related thereto.<br /> f. When the security of the State so states in writing, the appearance shall be conducted in executive session. (Sec.22, Art. VI, 1987 Philippine Constitution)<br /><br /> 18. The power of Congress to conduct inquiries in aid of legislation is broad. This is based on the proposition that a legislative body cannot legislate wisely or effectively in the absence of information respecting the conditions which the legislation is intended to affect or change. [Neri v. Senate Committee on Accountability of Public Officers and Investigations, et al., G. R. No. 180643, March 25, 2008 citing Arnault v. Nazareno, 87 Phil. 32 (1950)] Inevitably adjunct, thereto, is the compulsory process to enforce it. (Ibid.)<br /> The power extends even to executive officials and the only way for them to be exempted is through a valid claim of executive privilege. (Ibid., citing Senate of the Philippines, etc., et al., v. Ermita, et al., G. R. No. 169777, April 20, 2006)<br /><br /> 19. The Congressional power to conduct inquiries in aid of legislation has limitations. To be valid, it is imperative that it is done in accordance with the Senate or House duly published rules of procedure and that the rights of the persons appearing in or affected by such inquiries are respected. [Neri v. Senate Committee on Accountability of Public Officers and Investigations, et al., G. R. No. 180643, March 25, 2008]<br /><br /> 20. Exec. Order No. 464 is valid insofar as it requires Presidential consent for appearance during the “question hour” under Sec. 22, Article VI of the Constitution’ (Senate of the Philippines, etc., et al., v. Ermita, et al., G. R. No. 169777, April 20, 2006)<br /> It is within the Presidential prerogative, explicitly provided for by the Constitution, that a department head who appears before Congress during the “question hour” at his own initiative must always secure the consent of the President. (Ibid.)<br /> <br /> 21. Exec. Order No. 464 is not valid insofar as it requires Presidential consent for appearance during inquiries in aid of legislation under Sec. 21 of Article VI of the Constitution,<br /> The requirement for consent cannot be applied to appearances of department heads in inquiries in aid of legislation. <br /> Congress is not bound in such instances to respect the refusal of the department heads to appear unless a valid claim of privilege is subsequently made, either by the President or the Executive Secretary. The limitation should be with respect to information and not persons. (Senate of the Philippines, etc., et al., v. Ermita, et al., G. R. No. 169777, April 20, 2006)<br /><br /> 22. The revocation of E.O. 464 with regard to inquiries in aid of legislation does in any way limit the Philippine concept of executive privilege which has Constitutional underpinnings. This is unlike the United States where executive privilege is further accorded the concept with statutory status. (Neri v. Senate Committee on Accountability of Public Officers and Investigations, et al., G. R. No. 180643, March 25, 2008 in relation to Senate of the Philippines, etc., et al., v. Ermita, et al., G. R. No. 169777, April 20, 2006)<br /> <br /> 23. Concept of the executive’s “presumptively privileged communications.” There is great public interest in preserving the confidentiality of conversation that takes place in the President’s performance of his official duties. [Neri v. Senate Committee on Accountability of Public Officers and Investigations, et al., G. R. No. 180643, March 25, 2008 citing United States v. Nixon, 418 U.S. 683) Presidential communications are thus considered as “presumptively privileged.” The presumption is founded on the “President’s generalized interest in confidentiality.” (Ibid.)<br /><br /> 24. Elements of the presidential communications privilege:<br /> a, The protected communication must relate to a “quintessential and non-delegable presidential power.”<br /> b. The communication must be authored or “solicited and received” by a close advisor of the President or the President himself. the judicial test is that an advisor must be in “operational proximity” with the President.<br /> c. The presidential communications privilege remains a qualified privilege that may be overcome by a showing of adequate need such that the information sought “likely contains important evidence” and by the unavailability of the information elsewhere by an appropriate investigating authority. (Neri v. Senate Committee on Accountability of Public Officers and Investigations, et al., G. R. No. 180643, March 25, 2008 citing various cases)<br /><br /> 25. Purpose of the executive’s “presumptively privileged communications.” The privilege is said to be necessary to guarantee the candor of presidential advisors and to provide “the President and those who assist him with freedom to explore the alternatives in the process of shaping policies and making decisions and to do so in a way many would be unwilling to express except privately.” [Neri v. Senate Committee on Accountability of Public Officers and Investigations, et al., G. R. No. 180643, March 25, 2008 citing United States v. Nixon, 418 U.S. 683) <br /> 26. The two kinds of executive privilege are:<br /> a. Presidential communications privilege; and<br /> b. Deliberative process privilege. [Neri v. Senate Committee on Accountability of Public Officers and Investigations, et al., G. R. No. 180643, March 25, 2008 citing U.S. Court of Appeals In Re: Sealed Case No. 96-3124, June 17, 1997)<br /><br /> 27. Presidential communications privilege as a kind of executive privilege refers to communications, documents or other materials that reflect presidential decision-making and deliberations and that the President believes should remain confidential. [Neri v. Senate Committee on Accountability of Public Officers and Investigations, et al., G. R. No. 180643, March 25, 2008 citing U.S. Court of Appeals In Re: Sealed Case No. 96-3124, June 17, 1997)]<br /><br /> 28. Deliberative process privilege as a kind of executive privilege includes advisory opinions, recommendations and deliberations comprising part of a process by which governmental decisions and policies are formulated. [Neri v. Senate Committee on Accountability of Public Officers and Investigations, et al., G. R. No. 180643, March 25, 2008 citing U.S. Court of Appeals In Re: Sealed Case No. 96-3124, June 17, 1997)]<br /><br /> 29. Scope of the executive privilege. The claim of executive privilege is highly recognized in cases where the subject of the inquiry relates to a power textually committed by the Constitution to the President, such as the area of military and foreign relations.<br /> Under our Constitution, the President is the repository of the commander-in-chief (Sec. 18, Art. VII); appointing (Sec. 16, Art. VII); pardoning (Sec. 19, Art. VII); and diplomatic (Secs. 20 and 21, Art. VII) powers. Consistent with the doctrine of separation of powers, the information relating to those powers may enjoy greater confidentiality than others. [Neri v. Senate Committee on Accountability of Public Officers and Investigations, et al., G. R. No. 180643, March 25, 2008 citing U.S. Court of Appeals In Re: Sealed Case No. 96-3124, June 17, 1997)]<br /><br /> 30. Operational proximity test to determine who could invoke the executive privilege. The privilege is confined only to those who have “operational proximity: to direct presidential decision-making. Thus, the privilege is meant to encompass only those functions that form the core of presidential authority, involving what the court characterized as “quintessential and non-delegable Presidential power,” such as the commander in chief power, appointment and removal power, the power to grant pardons and reprieves, the sole authority to receive ambassadors and other public officers, the power to negotiate treaties (Neri v. Senate Committee on Accountability of Public Officers and Investigations, et al., G. R. No. 180643, March 25, 2008 citing CRS Report for Congress, Presidential Claims of Executive Privilege: History, Law, Practice and Recent Developments at pp. 18-19); the power to enter into executive agreements without the concurrence of the Legislature which has been traditionally recognized in Philippine jurisprudence (Neri, supra citing Bernas, S.J., The 1987 Constitution of the Republic of the Philippines, A Commentary, 2003 ed. p. 903)<br /><br /> 31. Confidentiality in executive privilege, being subject to “balancing against other interest” is not absolute. There are exceptions where it may not be availed of:<br /> a. Neither the doctrine of separation of powers, nor the need for confidentiality of high-level communications, without more, can sustain an absolute unqualified Presidential privilege of immunity from judicial process under all circumstances<br /> b. Presidential communications are merely presumptively privileged and that the presumption can be overcome only by mere showing of public need by the branch seeking access to conversations. <br /> c. Demonstrated, specific need for evidence in pending criminal trial outweighs the President’s “generalized interest in confidentiality.” (Neri v. Senate Committee on Accountability of Public Officers and Investigations, et al., G. R. No. 180643, March 25, 2008 citing United States v. Nixon, 418 U.S. 683) <br /><br /> 32. Congress may not avail of the people’s right to public information in order to obtain information in aid of because there are differences between the two. The demand of a citizen for the production of documents pursuant to his right to information does not have the same obligatory force as a subpoena duces tecum issued by Congress. Neither does the right to information grant a citizen the power to exact testimony from government officials. These powers belong only to Congress, not to an individual citizen. (Neri v. Senate Committee on Accountability of Public Officers and Investigations, et al., G. R. No. 180643, March 25, 2008 citing Senate of the Philippines, etc., et al., v. Ermita, et al., G. R. No. 169777, April 20, 2006)<br /><br /> 33. Exercise of congressional privilege to obtain information in aid of legislation is not obtaining information in matters of public concern. While Congress is composed of representatives elected by the people, it does not follow, except in a highly qualified sense, that in every exercise of its power of inquiry, the people are exercising their right to information. <br /> When the members of the Committees of Congress discharge their power, they do so as members of Congress and not exercising a right properly belonging to the people in general. (Neri v. Senate Committee on Accountability of Public Officers and Investigations, et al., G. R. No. 180643, March 25, 2008)<br /><br /> 34. Exec. Order No. 464 which requires among others certain officers of the Armed Forces of the Philippines (AFP) to secure Presidential consent prior to appearance before a Senate Committee. Is this valid is valid.<br /> Tradition and jurisprudence hold that the commander-in-chief powers of the President are not encumbered to the same degree of restrictions as that which may attach to executive privilege or executive control. (Gudani, et al., v. Senga, etc., et al., G. R .No. 170165, August 15, 2006)<br /><br /> 35. It appears that the Senate is not anymore considered as a continuing body. The legislative inquiry must be in accordance with “duly published rules of procedure” because every Senate is distinct from the one before it or after. Since Senatorial elections are held every three (3) years for one-half of the Senate’s membership, the composition of the Senate also changes by the end of each term. Each Senate may thus enact a different set of riles as it may deem fit. (Neri v. Senate Committee on Accountability of Public Officers and Investigations, et al., G. R. No. 180643, March 25, 2008 citing Senate of the Philippines, etc., et al., v. Ermita, et al., G. R. No. 169777, April 20, 2006)<br /><br /> 36. It is legal to setup duly authorized duty-free shops in the SSEZ to sell tax and duty-free consumer items in the Secured Area. This is in line with the policy enunciated in the law that “the Subic Special Economic Zone shall be developed into a self-sustaining, industrial, commercial, financial and investment center to generate employment opportunities in and around the zone and to attract and promote productive foreign investments.”<br /> While it is true that Section 12 (b) of Rep. Act No. 7227 mentions only raw materials, capital and equipment, this does not necessarily mean that the tax and duty free buying privilege is limited to these types of articles to the exclusion of consumer goods.<br /> It must be remembered that in construing statutes, the proper course is to start out and follow the true intent of the Legislature and to adopt that sense which harmonizes best with the context and promotes to the fullest manner the policy and objects of the Legislature.<br /> The concept of inclusio unius est exclusio alterius does not find application because the phrase “tax and duty-free importations of raw materials, capital and equipment” was merely cited as an example of incentives that the SSEZ is authorized to grant, in line with its being a free port zone. Thus, the legislative intent is that consumer goods entering the SSEZ which satisfy the needs of the zone and are consumed there are not subject to duties and taxes in accordance with Philippine law. (Coconut Oil Refiners Association, Inc., etc., et al., v. Torres, etc., et al., G. R. No. 132527, July 29, 2005)<br /><br />` 37. A Presidential Proclamation that allowed for the limited withdrawal from the Clark Special Economic Zone or the John Hay Economic Zone of consumer goods tax and duty-free is invalid as the statutory tax exempt privilege was granted only to the Subic Special Economic Zone and not to John Hay or Clark. This is so because the Constitution mandates that no law granting tax exemption shall be passed without the concurrence of a majority of all the members of Congress. (Coconut Oil Refiners Association, Inc., etc., et al., v. Torres, etc., et al., G. R. No. 132527, July 29, 2005 citing John Hay People’s Alternative Coalition, et al., v. Lim, etc., et al., G.R. No. 119775, October 24, 2003, 414 SCRA 356)<br /> Furthermore, the law is very clear that the “exportation or removal of goods from the territory of the Subic Special Economic Zone to other parts of the Philippine territory shall be subject to customs duties and taxes under the Customs and Tariff Code and other relevant tax laws of the Philippines.” (Ibid.)<br /><br /><br /> 38. The constitutional mandate on initiative and referendum. The Congress shall, early as possible, provide for a system of initiative and referendum, and the exceptions therefrom, whereby the people can directly propose and enact laws or approve or reject any act or law or part thereof passed by the Congress or local legislative body after the registration of a petition therefor signed by at least ten per centum of the total number of registered voters, of which every legislative district must be represented by at least three per centum of the registered voters thereof. (Sec. 32, Article VI, 1987 Constitution)<br /><br /> 39. Initiative is the power of the people to propose amendments to the Constitution or to propose and enact legislation through an election called for the purpose [Sec. 3 (a), Rep. Act No. 6735]<br /><br /> 40. Referendum is the power of the electorate to approve or reject a legislation through an election called for the purpose. [Sec. 3 (c), Rep. Act No. 6735]<br /><br /> 41. Differences between the concepts and processes of initiative and referendum. Initiative is the power of the people to propose amendments to the Constitution or to propose and enact legislation through an election called for the purpose [Sec. 3 (a), Rep. Act No. 6735] WHILE referendum is the power of the electorate to approve or reject a legislation through an election called for the purpose. [Sec. 3 (c), Ibid.)<br /><br /> 42. Restrictions on the Presidential power to authorize the President to fix tariff rates, import and export quotas, tonnage and wharfage dues. The Congress may, by law, authorize the President to fix within specified limits, subject to such limitations and restrictions as it may impose, tariff rates, import and export quotas, tonnage and wharfage dues, and other duties or imposts within the framework of the national development program of the government. [1987 Constitution, Art. VI, Sec. 28 (2)]<br /><br /> Art. VII. EXECUTIVE DEPARTMENT<br /><br /> 1. Revocation of E.O. 464 did not in any way diminish the concept of executive privilege. Neri v. Senate Committee on Accountability of Public Officers and Investigations, et al., G. R. No. 180643, March 25, 2008 in relation to Senate of the Philippines, etc., et al., v. Ermita, et al., G. R. No. 169777, April 20, 2006)<br /> <br /> 2. Extent of and limitations upon the President’s power of appointment.<br /> a. “Two months before the next presidential elections and up to the end of his term, a President or Acting President shall not make appointments, except temporary appointments to executive positions when continued vacancies therein will prejudice public service or endanger public safety.” (Sec. 15, Art. VII, 1987 Philippine Constitution)<br /> b. “The President shall nominate and, with the consent of the Commission on Appointments, appoint the heads of the executive departments, ambassadors, other public ministers and consuls, or officers of the armed forces from the rank of colonel or naval captain, and other officers whose appointments are vested in him in this Constitution.” (1st sentence, 1st par., Sec. 16, Art. VII, 1987 Philippine Constitution)<br /> c. “He shall also appoint all other officers of the Government whose appointments are not otherwise provided for by law, and those whom he may be authorized by law to appoint. The Congress, may by law, vest the appointment of other officers lower in rank in the President alone, in the courts, or in the heads of departments, agencies, commissions, or boards.” (2nd and 3rd sentences, Ibid.) These appointments do not require the consent of the Commission on Appointments. “<br /> d. “The President shall have the power to make appointments during the recess of Congress, whether voluntary or compulsory, but such appointments shall be effective only until disapproval by the Commission on Appointments or until the next adjournment of the Congress.” (2nd par., Ibid.) <br /><br /> 3. Category or categories of officials whose appointments need confirmation by the Commission on Appointments:<br /> a. Heads of the executive departments,<br /> b. ambassadors, other public ministers and consuls, or<br /> c. officers of the armed forces from the rank of colonel or naval captain and<br /> d. other officers whose appointments are vested in the President by the Constitution, such as:<br />1) The Chairmen and Commissioners of the Commission on Audit, Civil Service Commission, and Commission on Election;<br />2) The Ombudsman and his Deputies. (Sec. 16, Art. VII, in relation to Art. IX, 1987 Constitution)<br /> The above enumeration may also be used to answer the question “What are the six categories of officials who are subject to the appointing power of the President ?”<br /> <br /> 4. An ad interim appointment is one that is made<br /> a. when Congress is not in session, or is made<br /> b. pending submission to the Commission on Appointments, or is made<br /> c. when the appointee has been by-passed for approval by the Commission on Appointments, for an office that requires the consent of the Commission on Appointments.<br /> It is not a temporary appointment but a permanent appointment because it takes effect immediately and can no longer be withdrawn by the President once the appointee has qualified into office.<br /><br /> 5. Acting appointment is a temporary appointment (Sevilla v. Court of Appeals, 209 SCRA 637), that will not ripen into a permanent appointment unless a new appointment which is permanent is made. (Marohombsar v. Alonto, 194 SCRA 390)<br /> <br /> 6. The President may abolish offices because he has been delegated the continuing authority to reorganize including to abolish the administrative structure of the National Government, to achieve simplicity, economy and efficiency which must be done in good faith. (Administrative Code of 1987, Book III, Section 31)<br /><br /> 7. Limitations on the pardoning power of the President.<br /> a. The power can only be exercised after conviction by final judgment of the offender;<br /> b. Such power does not extend to cases of impeachment;<br /> c. Persons convicted for violation of the rules and regulations concerning elections cannot be pardoned or paroled or their sentence suspended without the favorable recommendation of the Commission on Elections;<br /> d. Pardon cannot be exercised over civil contempts;<br /> e. Pardon cannot be exercised over congressional contempt declared by resolution of either houses of Congress.<br /><br /> 8. Pardon does not restore offices that have been forfeited. The pardoned convict must apply and requalify. (Monsanto v. Factoran, 170 SCRA 190) Neither does a pardon restore the right to hold public office unless such right be expressly restored by the pardon. (Revised Penal Code, Art. 36)<br /><br /> 9. Distinctions between pardon and amnesty:<br /> a. Amnesty is usually addressed to crimes against the sovereignty of the State, to political offenses, forgiveness being deemed more expedient for the public welfare than prosecution and punishment WHILE pardon condones infractions of the peace of the state.<br /> b. Amnesty is usually general, address to classes or even communities of persons WHILE pardon is usually addressed to an individual.<br /> c. In amnesty there may or may not be distinct acts of acceptance, so that if other rights are dependent upon it and are asserted, there is affirmative evidence of acceptance WHILE in pardon there must be distinct acts of acceptance. (Burdick v. U.S., 236 U.S. 79)<br /> d. Amnesty requires the concurrence of Congress WHILE pardon does not.<br /> e. Amnesty is a public act which the court takes judicial notice WHILE pardon is a private act of the President which must be pleaded and proved by the person pardoned because the courts do not take judicial notice of it. (Barrioquinto v. Fernandez, 82 Phil. 642)<br /> f. Amnesty looks backward and abolishes and puts into oblivion the offense with which the offender is charged and the person released by amnesty stands before the law precisely as though he had committed no offense WHILE pardon looks forward and relieves the offender from the consequence of an offense of which he has been convicted.<br /><br /> 10. The President is immune from suit during his tenure because:<br /> a. To subject the President to a civil suit would be to create an intolerable condition resulting from a general civil responsibility. The natural tendency to protect himself from such responsibility will necessarily result in a delay or inaction on important matters of government; time and efforts of the President would be uselessly spent in wrangling litigations;<br /> b. Dragging the President to courts for civil suits would certainly engender disrespect and disregard for the authority that he represents;<br /> c. The President is regarded by the public generally as the official who most nearly represent the people, who most perfectly epitomizes the government and the State. To put him on trial as a wrongdoer would practically be putting on trial the government itself;<br /> d. Public policy forbids the court from mulcting the President personally for damages which may result from the performance of his official duty. (Forbes v. Chioco Tiaco, 16 Phil. 534)<br /> Impleading the President as respondent during her tenure and incumbency in office degrades the dignity of the office, harass her and detracts her from the performance of her functions. While this may be so, she is subject to impeachment. (David, et al., v. President Gloria Macapagal-Arroyo, etc., et al., G. R. No. 171396, May 3, 2006)<br /><br /> 11. The “Calling-out Power” of the President under Section 18, Article VII of the Constitution provides that the President of the Philippines shall be the Commander-in-Chief of all armed forces of the Philippines and whenever it becomes necessary, he may call out such armed forces to prevent or suppress lawless violence, invasion or rebellion. (Art. VII, Sec. 18, 1st par., 1st sentence,)<br /><br /> 12. The constitutional safeguards on the exercise by the President of his power to proclaim martial law.<br /> a. There must actual invasion or rebellion.<br /> b. The duration of the proclamation shall not exceed sixty (60) days.<br /> c. Within 48 hours, the President shall report his action to Congress. If Congress is not in session, it must convene within 24 hours.<br /> d. Congress by majority vote of all its members voting jointly revoke the proclamation, and the President cannot set aside the revocation.<br /> e. By the same vote and in the same manner, upon initiative of the President, Congress may extend the proclamation, if the invasion or rebellion continues and public safety requires the extension.<br /> f. The Supreme Court may review the factual sufficiency of the proclamation, and the Supreme Court must decide the case within thirty days from the time it was filed.<br /> g. Martial law does not automatically suspend the privilege of the writ of habeas corpus or the operation of the Constitution. It does not supplant the functioning of the civil courts and of Congress. Military courts have no jurisdiction over civilians where civil courts are able to function. (see below for details)<br /><br /> 13. In case of invasion or rebellion, when the public safety requires it, he may, for a period not exceeding sixty days, suspend the privilege of the writ of habeas corpus or place the Philippines or any part thereof under martial law. (Art. VII, Sec. 18, 1st par., 2nd sentence)<br /><br /> 14. Within forty-eight hours from the proclamation of martial law or the suspension of the writ of habeas corpus, the President shall submit a report in person or in writing to the Congress. (Art. VII, Sec. 18, 1st par., 3rd sentence)<br /><br /> 15. The Congress, voting jointly, by a vote of at least a majority of all the Members in regular or special session, may revoke such proclamation or suspension, which revocation shall not be set aside by the President. (Art. VII, Sec. 18, 1st par., 4th sentence)<br /> The Congress, if not in session, shall, within twenty-four hours following such proclamation or suspension, convene in accordance with its rules without need of a call. (Ibid., 2nd par.)<br /><br /> 16. Upon the initiative of the President, the Congress may, in the same manner, extend such proclamation or suspension for a period to be determined by the Congress, if the invasion or rebellion shall persist and public safety requires it. (Art. VII, Sec. 18, 1st par., last sentence)<br /><br /> 17. A state of martial law does not suspend the operation of the Constitution, nor supplant the functioning of the civil courts or legislative assemblies, nor authorize the conferment of jurisdiction on military courts and agencies over civilians where civil courts are able to function, nor automatically suspend the privilege of the writ (Art. VII, Sec. 18, 4th par.) of habeas corpus.<br /><br /> 18. The suspension of the privilege of the writ shall apply only to persons judicially charged for rebellion or offenses inherent or directly connected with invasion. (Art. VII, Sec. 18, 5th par.)<br /> During the suspension of the privilege of the writ, any person thus arrested or detained shall be judicially charged within three days, otherwise he shall be released. (Art. VII, Sec. 18, last par.)<br /><br /> 19. The Supreme Court may review, in an appropriate proceeding filed by any citizen, the sufficient of the factual basis of the proclamation of martial law or the suspension of the privilege of the writ or the extension thereof, and must promulgate its decision thereon within thirty days from its filing. (Art. VII, Sec. 18, 54h par.)<br /> <br /> 20. Pres. Proc. No. 1017 is constitutional insofar as it constitutes a call by the President for the Armed Forces of the Philippines to suppress lawless violence. This is sustained by Sec.18, Art. VII of the Constitution which provides that, “The President shall be the Commander-in-Chief of all armed forces of the Philippines and whenever it becomes necessary, he may call out such armed forces to prevent or suppress lawless violence, invasion or rebellion.” (David, et al., v. President Gloria Macapagal-Arroyo, etc., et al., G. R. No. 171396, May 3, 2006)<br /><br /> 21. The following provisions of Pres. Proc. No. 1017 that give the President express or implied powers are invalid because of lack of authority under the constitution or existing law:<br /> a. To issue decrees;<br /> b. To direct the AFP to enforce obedience to all laws even those not related to lawless violence as well as decrees promulgated by the government.<br /> c. To impose standards on media or any form of prior restraint on the press.<br /> Under Sec. 17, Article XII the President, in the absence of legislation, cannot take over privately owned public utilities and private business affected with public interest. (David, et al., v. President Gloria Macapagal-Arroyo, etc., et al., G. R. No. 171396, May 3, 2006)<br /><br /> 22. G.O. No. 5 is valid. It is an order issued by the President acting as Commander-in-Chief addressed to subalterns in the AFP to carry out the provisions of P.P. No. 1017. <br /> It also provides a valid standard – that the military and the police should take only the “necessary and appropriate actions and measures to suppress and protect acts of lawless violence.” But the words, “acts of terrorism” found in G.O.No. 5 have not been legally defined and made punishable by Congress and should thus be deemed deleted from the said G. O. While terrorism has been described generally in media, no law has been enacted to guide the military and eventually the court, to determine the limits of the AFPs authority in carrying out the provisions of G. O. No. 5. (David, et al., v. President Gloria Macapagal-Arroyo, etc., et al., G. R. No. 171396, May 3, 2006)<br /><br /> 23. Warrantless arrests are not authorized under P.P.1017 and G.O. No. 5. (David, et al., v. President Gloria Macapagal-Arroyo, etc., et al., G. R. No. 171396, May 3, 2006)<br /> <br /> 24. The effects of proclamation of a state of a calamity by the President in areas devastated by typhoons. would have the following effects:<br /> a. The LGU’s in the places affected may enact a supplemental budget for the purchase of supplies and materials or the payment for services to prevent danger to or loss of life or property.<br /> b. The five percent (5%) of the estimated revenue from the regular sources required to be appropriated in the budgets of the affected LGUs for unforeseen expenditures may be used by them.<br /> c. Science and technological personnel of the LGU’s affected shall be paid hazard allowance.<br /> d. Public health workers in the affected LGUs shall be entitled to hazard allowance.<br /> e. The prices of basic commodities in the affected LGUs shall automatically be frozen at their prevailing levels or placed under automatic price controls.<br /> f. A crime committed in the affected LGUs will be considered aggravated.<br /><br /> 25. Exec. Order No. 420 which directs all government agencies and government-owned and controlled corporations to adopt a uniform data collection and format for their existing ID Systems is valid. There is no usurpation of legislative authority and violation of privacy. (Kilusan Mayo Uno, et al, v. Director-General, etc., et al., April 19, 2006 and companion cases)<br /> <br /> 26. There is no intrusion into legislative powers. EO 420 applies only to government entities that already maintain ID systems and issue ID cards pursuant to their regular functions under existing law. There is no grant to such government entities of powers they do not already possess under existing law.<br /> EO 420 is a proper subject of executive issuance under the President’s constitutional power of control over government activities in the Executive Department as well as under the President’s constitutional duty to ensure that laws are faithfully executed.<br /><br /> 27. There is no violation of the right to privacy regarding the 14 specific data required in EO 420 as these are routine data for ID systems unlike the sensitive and potentially embarrassing medical records of patients taking prescription drugs. EO 420 narrowly draws the data collection, recoding and exhibition while prescribing comprehensive safeguards. (Kilusan Mayo Uno, et al, v. Director-General, etc., et al., April 19, 2006 and companion cases)<br /><br /> 28. The President may contract foreign loans on behalf of the Republic of the Philippines with the prior concurrence of the Monetary Board, and subject to such limitations as may be provided by law. (1987 Constitution, Article VII, Sec. 20, 1st sentence)<br /><br /> Art. VIII. JUDICIAL DEPARTMENT<br /><br /> 1. Cases to be heard by the Supreme Court en banc:<br /> a. Cases involving the constitutionality of a treaty, international or executive agreement, or law;<br /> b. Cases which under the Rules of Court are required to be heard en banc;<br /> c. Cases involving the constitutionality, application, or operation of presidential decrees, proclamations, orders, instructions, ordinances, and other regulations;<br /> d. Cases heard by a division when the required majority is not obtained;<br /> e. Cases where a doctrine or principle of law previously laid down will be modified or reversed;<br /> f. Administrative cases against judges when the penalty is dismissal;<br /> g. Election contests for President or vice President.<br /><br /> 2. Expanded jurisdiction of the Supreme Court. The Supreme Court may now properly “determine whether or not there has been a grave abuse of discretion amounting to lack or excess of jurisdiction on the part of any branch or instrumentality of the Government.” (Art. VIII, Sec. 1, 2nd par., 1987 Constitution)<br /> The “political question doctrine” which have been justified by the Supreme Court in some decided cases to maintain a hands-off policy in ruling upon the validity of acts of the executive or legislative department which should be properly submitted directly to the people for their decision has been diluted through the expanded jurisdiction of the Supreme Court granted under the 1987 Constitution.<br /> <br /> 3. The right of Congress to conduct inquiries in aid of legislation may be subject to review by the Supreme Court pursuant to its certiorari powers because it is, in theory, no less susceptible to abuse than executive or judicial power. [Neri v. Senate Committee on Accountability of Public Officers and Investigations, et al., G. R. No. 180643, March 25, 2008 citing Senate v. Ermita, April 20, 2006 (488 SCRA 1)]<br /><br /> 4. A constitutional issue may be passed upon only if essential to the decision of a case or controversy. (Heirs of Cesar Marasigan, etc., v. Marasigan, et al., G. R. No. 156078, March 14, 2008 citing Estrada v. Desierto, G. R. No. 156160, 9 December 2004, 445 SCRA 655, 666)<br /> Even if all the requisites for judicial review are present, the Supreme Court will not entertain a constitutional issue unless it is the very lis mota (Heirs of Cesar Marasigan, supra citing Griffith v. Court of Appeals, 428 Phil. 878, 888; 379 SCRA 94, 103 (2002) in turn citing Hontiveros v. Regional Trial Court, Br. 25, Iloilo City, G. R. No. 125465, 29 June 1999, 309 SCRA 340, 354)<br /> For the Supreme Court to take cognizance of a constitutional issue it<br /> a. must be properly raised and presented in the case, and<br /> b. its resolution is necessary to a determination of the case, i.e., the issue of constitutionality must be the very lis mota presented. (Planters Products, Inc. v. Fertiphil Corporation, G. R. No. 166006, March 14, 2008 citing Tropical Homes, Inc. v, National Housing Authority, G. r. No. L-48672, July 31, 1987, 152 SCRA 540)<br /><br /> 5. Operative fact doctrine. An unconstitutional law has an effect before being declared unconstitutional.<br /> The doctrine of operative fact as an exception to the general rule, only applies as a matter of equity and fair play. (Planters Products, Inc. v. Fertiphil Corporation, G. R. No. 166006, March 14, 2008 citing Republic v. Court of Appeals, G.R. No. 79732, November 8, 1993, 227 SCRA 509) It nullifies the effects of an unconstitutional law by recognizing that the existence of a statute prior to a determination of unconstitutionality is an operative fact and may have consequences which cannot always be ignored. The past cannot always be erased by a new judicial declaration. (Planters Products, Inc, supra citing Peralta v. Civil Service Commission, G. R. No. 95832, August 10, 1992, 212 SCRA 425)<br /> <br /> 6. Supreme Court does not abandon its constitutional duty when it required the parties to consider a proposal that would lead to a possible compromise. It did so to test a tool that other jurisdictions find effective in settling similar cases, to avoid a piecemeal consideration of the questions for review and to avert a constitutional crisis between the executive and legislative branches of government. (Neri v. Senate Committee on Accountability of Public Officers and Investigations, et al., G. R. No. 180643, March 25, 2008)<br /><br /> 7. Rationale for referring resolution of constitutional issues for negotiations leading to a compromise. <br /> a. In order to avoid a resolution that might disturb the balance of power between the two branches and inaccurately reflect their true needs. [Neri v. Senate Committee on Accountability of Public Officers and Investigations, et al., G. R. No. 180643, March 25, 2008 citing United States v. American Tel. & Tel. Co., 179 U.S. App. Supp. D.C., 198, 551 F. 2d. 384 (1976)]<br /> b. Much of the spirit of compromise is reflected in the generality of the language of the Constitution. The coordinate branches do not exist in an exclusive adversary relationship to one another when a conflict in authority exists. Rather each branch should take cognizance of an implicit constitutional mandate to seek optional accommodation through a realistic evaluation of the needs of the conflicting branches in the particular fact situation. (Neri, supra citing United States v. American Tel. & Tel. Co., 567 F 2d 121 (1977)]<br /><br /> 8. Legal standing or locus standi is “personal and substantial interest in the case such that he party has sustained or will sustain direct injury as a result of the governmental act that is being challenged.” (Automotive Industry Workers Alliance (AIWA),etc., et al., v. Romulo, etc. ,et al., G. R. No. 157509, January 18,2005 citing Integrated Bar of the Philippines, G. R. No. 141284, 15 August 2000, 338 SCRA 81, 100)<br /> <br /> 9. Need for locus standi. Corollary to the judicial power is the principle of locus standi of a litigant. He who is directly affected and whose interest is immediate and substantial has the standing to sue. Thus, a party must show a personal stake in the outcome of the case or an injury to himself that can be redressed by a favorable decision in order to warrant an invocation of the court’s jurisdiction and justify the exercise of judicial power on his behalf. (Domingo, et al., v. Carague, etc., et al., G. R. No. 161065, April 15, 2005)<br /><br /> 10. Requisites for citizen to have locus standi. He must establish that he has suffered some actual or threatened injury as a result of the allegedly illegal conduct of the government; b. the injury is fairly traceable to he challenged action; and c. the injury is likely to be redressed by a favorable action. (Automotive Industry Workers Alliance (AIWA),etc., et al., v. Romulo, etc. ,et al., G. R. No. 157509, January 18, 2005 citing Gonzales v. Narvasa, G. R. No. 140835, 14 August 2000, 227 SCRA 733, 740 in turn citing Telecommunications and Broadcast Attorneys of the Philippines, Inc. v. Commission on Elections, G. R. No. 132922, 21April 1998, 289 SCRA 337, 343)<br /><br /> 11. Locus standi to impugn the alleged encroachment by the executive department into the legislative domain of Congress.<br /> a. Only those who shall be directly affected by such executive encroachment, such as for example employees who would find themselves subject to disciplinary powers that may be imposed under the questioned Executive Order as they have a direct and specific interest in raising the substantive issue therein (Automotive Industry Workers Alliance (AIWA),etc., et al., v. Romulo, etc. ,et al., G. R. No. 157509, January 18, 2005) or employees who are going to be demoted, transferred or otherwise affected by any personnel action subject to the rule on exhaustion of administrative remedies.<br /> b. Moreover, and if at all, only Congress, can claim any injury from the alleged executive encroachment o he legislative function to amend, modify and/or repeal laws. (Automotive Industry Workers Alliance (AIWA),etc., et al., v. Romulo, etc. ,et al., G. R. No. 157509, January 18, 2005 citing Gonzales v. Narvasa, G. R. No. 140835, August 14,2000, 337 SCRA 733, 741)<br /><br /> 12. Requisites for a taxpayer’s suit. A taxpayer’s suit is properly brought only when there is an exercise of the spending or taxing power of Congress. (Automotive Industry Workers Alliance (AIWA),etc., et al., v. Romulo, etc. ,et al., G. R. No. 157509, January 18, 2005 citing Gonzales v. Narvasa, G. R. No. 140835, August 14,2000, 337 SCRA 733, 741)<br /> There must be established that a disbursement of public funds is in contravention of law or the Constitution. (Ibid.)<br /><br /> 13. Requirements that must be met before taxpayers, concerned citizens and legislators may be accorded standing to sue: <br /> a. The case should involve constitutional issues;<br /> b. For taxpayers, there must be a claim of illegal disbursement of public funds or that the tax measure is unconstitutional.<br /> c. For voters, there must be a showing of obvious interest in the validity of the election law in question.<br /> d. For concerned citizens, there must be a showing that the issues raised are of transcendental importance which must be settled early.<br /> e. For legislators, there must be a claim that the official action complained of infringes upon their prerogatives as legislators. (David, et al., v. President Gloria Macapagal-Arroyo, etc., et al., G. R. No. 171396, May 3, 2006)<br /><br /><br /> 14. Former COA Chairmen and Commis-sioners do not have legal standing to bring suit questioning validity of COA Organizational Restructuring Plan because they have not shown “a personal stake in the outcome of the case” or an actual or potential injury that can be redressed by the Court’s favorable decision. They themselves admitted that “they do not seek any affirmative relief nor impute any improper or improvident act against the said respondents” and ”are not motivated by any desire to seek affirmative relief from COA or from respondents that would redound to their personal benefit or gain.” They failed to show any “present substantial interest” in the outcome of the case.<br /> Nor may they claim that as taxpayers, they have legal standing since nowhere in their petition do they claim that public funds are being spent in violation of law or that there is a misapplication of taxpayers’ money. (Domingo, et al., v. Carague, etc., et al., G. R. No. 161065, April 15, 2005)<br /><br /> 15. Locus standi may be waived. The rule on standing, however, is a matter of procedure, hence, can be relaxed for nontraditional plaintiffs like ordinary citizens, taxpayers and legislators when the public interest so requires, such as when the matter is of transcendental importance, of overarching significance to society, or of paramount public interest. (Automotive Industry Workers Alliance (AIWA),etc., et al., v. Romulo, etc. ,et al., G. R. No. 157509, January 18, 2005 citing Araneta v. Dinglasan, 84 Phil.368 [1949]; Dumlao v. Commission on Elections, G. R. No. L-52245, 22 January 1980, 95 SCRA 392, 404 and other cases)<br /><br /> 16. The CSC is a party adversely affected who may appeal a decision of the Court off Appeals that reversed an order of the CSC terminating a municipal employee because it has been mandated by the Constitution to preserve and safeguard the integrity of our civil service system. But a former mayor is not a party in interest. ( Dagadag v. Tongnawa,etal., G. R. Nos. 161166-67,February 3,2005 citing Civil Service Commission v. Dacoycoy, G. R. No. 135805, April 29, 1999, 306 SCRA 405; cited in Francisco Abella, Jr., v. Civil Service Commission, G.R. No. 1525754,November 17, 2004, 442 SCRA 507)<br /> The incumbent mayor may interpose the appeal because of his power to appoint and remove municipal employees. Whenever his order imposing administrative sanctions upon erring municipal personnel is challenged, he should be allowed to defend his action considering that he is the appointing and removing authority. The second reason why he has legal personality is because the salaries of municipal officials are drawn from the municipal funds. (Dagadag, supra)<br /><br /> 17. There was no executive interference in the judicial functions of the Supreme Court, when the Secretary of Finance forwarded to the Chief Justice a memorandum attaching a copy of the Foreign Chambers Report dated October 17,2001 because the memorandum was merely “noted” to acknowledge its filing. It had no further legal significance. (J. G. Summit Holdings, Inc. v. Court of Appeals, et al., G. R.No.124293, January 31,2005)<br /><br /> 18. Some of the constitutional safeguards to maintain judicial independence are:<br /> a. The Supreme Court is a constitutional body and cannot be abolished by mere legislation.<br /> b. The Supreme Court Justices may be removed only through impeachment.<br /> c. The constitutionally allocated jurisdiction of the Supreme Court cannot be diminished.<br /> d. The appellate jurisdiction of the Supreme Court cannot be increased by law without its consent.<br /> e. Appointees to the Judiciary are nominated by the Judicial and Bar Council and are not subject to confirmation by the Commission on Appointments<br /> f. The Supreme Court has the exclusive power to discipline judges of lower court.<br /> g. The Members of the Judiciary have security of tenure, which cannot be undermined by a law reorganizing the Judiciary.<br /> h. Members of the Judiciary cannot be designated to any agency performing quasi-judicial or administrative functions.<br /> i. The salaries of Members of the Judiciary cannot be decreased during their continuance in office.<br /> j. The Judiciary has fiscal autonomy.<br /> k. The Supreme Court has the exclusive power to promulgate rules of pleading, practice and procedure.<br /> l. Only the Supreme Court can temporarily assign judges to other stations.<br /> m. It is the Supreme Court who appoints all officials and employees of the Judiciary.<br /><br /> 19. Article 96 of the Articles of War is service connected “for allegedly violating of their solemn oath to defend the constitution and duly constituted authority,” “disrespect to the military profession” which could result to discipline that is dismissal from the service. Since it is “service-connected” it is triable by court-martial.<br /> The acts which are “service connected” are not absorbed by the criminal offenses for which they are being tried before the civil court, which is coup d’etat. The concept of absorption is peculiarly applicable in criminal proceedings only and applies only to crimes penalized by the same statute. The “service-connected” acts are penalized administratively while coup d’etat is a crime.<br /> The declaration of absorption by the court is without legal basis as the law is clear that the Article 96, “conduct unbecoming” is service connected. (Gonzales, et al., v. Abaya, et al., G.R. No. 164007, August 10, 2006)<br /><br /> 20. Rules for determining who has jurisdiction: civil courts or military courts under Rep. Act No. 7055:<br /> General Rule: Members of the Armed Forces of the Philippines (AFP) and other persons subject to military law including members of the Civilian Armed Force Geographical Units (CAFGU) who commit crimes under the Revised Penal Code (like coup d’etat), other special penal laws or local ordinances shall be tried by the proper civil court.<br /> Exception: Where the civil court, before arraignment, has determined the offense to be service connected, then the case is triable by court martial.<br /> Exception to the exception: Where the President in the interest of justice, directs before arraignment, that any such crimes or offenses be tried by the proper civil courts. (R. A. No. 7055 cited in Gonzales, et al., v. Abaya, et al., G.R. No. 164007, August 10, 2006)<br /><br /> 10. Composition of the Judicial and Bar Council. The Chief Justice as ex oficio Chairman, the Secretary of Justice, and a representative of the Congress as ex oficio Members, a representative of the Integrated Bar, a professor of law, a retired Member of the Supreme Court, and a representative of the private sector. [1987 Constitution, Article VIII, Sec. 8 (1)]<br /><br /> Art. IX. CONSTITUTIONAL COMMISSIONS<br /><br /> A. COMMON PROVISIONS<br /><br /> 1. The effective operation of the so-called “Rotational Scheme” for the Constitutional Commissions requires that the first commissioners should start on a common date and any vacancy before the expiration of the term should be filled only for the unexpired balance of the term.<br /><br /> B. THE CIVIL SERVICE COMMISSION<br /><br /> 1. The Civil Service Commission is the central personnel agency of the government charged with the duty of determining questions of qualifications of merit and fitness of those appointed to the civil service.”<br /><br /> C. THE COMMISSION ON ELECTIONS<br /><br /> D. THE COMMISSION ON AUDIT<br /><br /> Art. X. LOCAL GOVERNMENT<br /><br /> Refer to discussion below<br /><br /> Art. XI. ACCOUNTABILITY OF PUBLIC OFFICERS<br /><br /> 1. COA has authority to investigate whether directors, officials or employees of government owned and controlled corporations, receiving additional allowances and bonuses are entitled to such benefits under special laws. <br /> A local water district, being a government-owned and controlled corporation with special charter created pursuant to law, P. D. 198, is subject to COA examination. (de Jesus, et al., v. Commission on Audit, G. R. No. 149154, June 10, 2003)<br /><br /> 2. Ombudsman has no jurisdiction to entertain questions on the constitutionality of a law. (Presidential Ad Hoc Fact-Finding Committee on Behest Loans, etc., v. Desierto, etc., et al., G.R. No. 145184, March 14, 2008 citing Estarija v. Ranada, G. R. No. 159314, June 26, 2006, 492 SCRA 652, 665)<br /><br /> 3. Courts should not interfere with the Ombudsman’s investigatory power, exercised through the Ombudsman Prosecutors, and the authority to determine the presence or absence of probable cause, except when the finding is tainted with grave abuse of discretion amounting to lack or excess of jurisdiction. (Presidential Ad Hoc Fact-Finding Committee on Behest Loans, etc., v. Desierto, etc., et al., G.R. No. 145184, March 14, 2008 citing Collantes v. Marcelo, G. R. Nos.167006-07, August `14, 2007, 530 SCRA 142, 150-151))<br /><br /> 4. it is the duty of the Ombudsman to investigate “on complaint by any person, any act or omission of any public official, employee, office or agency when such act or omission appears to be illegal, unjust, improper, or inefficient.” [Article XI, Sec. 13 (1), 1987 Constitution)<br /><br /> 5. Ombudsman has the power to suspend preventively for a period not exceeding six (6) months without any notice or hearing. It is merely a preliminary step in an administrative investigation and not a final determination of guilt. (Garcia v. Mojica, 314 SCRA 207 [1999]) <br /><br /> 6. The Ombudsman has the power to impose administrative penalties upon erring public officers or employees which is not merely recommendatory. <br /> The OMB has the power to directly impose the penalty of removal, suspension, demotion, fine, censure, or prosecution of a public officer or employee, other than a member of Congress and the Judiciary, found to be at fault, within the exercise of its administrative disciplinary authority as provided in the Constitution, Republic Act No. 6770, as well as jurisprudence. (Office of the Ombudsman v. Lisondra, et al., G. R. No. 174045, March 7, 2008)<br /><br /> 7. This power gives the said constitutional office teeth to render it not merely functional, but also effective. Section 21 of Republic Act No. 6770 provides:<br /> “Sec. 21. Officials Subject To Disciplinary Authority; Exceptions. – The Office of the Ombudsman shall have disciplinary authority over all elective and appointive officials of the Government and its subdivisions, instrumentalities and agencies, including Members of the Cabinet, local government, government-owned or controlled corporations and their subsidiaries, except over officials who may be removed only by impeachment or over Members of Congress, and the Judiciary.” (Office of the Ombudsman v. Lisondra, et al., G. R. No. 174045, March 7, 2008)<br /><br /> 8. Constitutional officers who may be removed through impeachment:<br /> a. the President;<br /> b. the Vice-President,<br /> c. the Members of the Supreme Court;<br /> d. the Members of the Constitutional Commissions, and<br /> e. the Ombudsman. (Art. XI, Sec.2, 1987 Constitution)<br /><br /> 9. Grounds for impeachment of the various constitutional officers. <br /> a. Culpable violation of the Constitution,<br /> b. Treason,<br /> c. Bribery,<br /> d. Graft and corruption,<br /> e. Other high crimes, or<br /> f. Betrayal of public trust. (Art. XI, Sec.2, 1987 Constitution)<br /><br /> 10. Cronyism which involves unduly favoring a crony to the prejudice of public interest is a form of violation of the oath of office which constitute betrayal of the public trust, a ground for impeachment.<br /><br /> 11. An administrative officer given by statute the rank of Justice is not a member of the Judiciary, but of the Executive Department. He may therefore be investigated by the Ombudsman. The Supreme Court does not have jurisdiction to investigate because it would be violative of the concept of separation of powers. (Noblejas v. Teehankee, 23 SCRA 405 [1968])<br /><br /> Art. XII. NATIONAL PATRIMONY AND ECONOMY<br /><br /> 1. National patrimony refers not only to our natural resources but also to our cultural heritage. (Manila Prince Hotel v. Government Service Insurance System, 267 SCRA 408)<br /><br /> 2. All lands of the public domain, waters, minerals, coal, petroleum, and other mineral oils, all forms of potential energy, fisheries, forests, and other mineral oils, all forces of potential energy, fisheries, forests or timber, wildlife, flora and fauna, and other natural resources are owned by the State. (Art. XII, Sec. 2, 1st par., 1st sentence)<br /><br /> 3. Under the Regalian doctrine, the State is the source of any asserted right to ownership of land premised on the basic doctrine that all lands not otherwise appearing to be clearly within private ownership are presumed to belong to the State. [Republic v. Manna Properties ,Inc., etc. citing Pagkatipunan v. Court of Appeals, 429 Phil. 149; 390 SCRA 343 (2002)]<br /><br /> 4. With the exception of agricultural lands, all other natural resources shall not be alienated. (Art. XII, Sec. 2, 1st par., 2nd sentence)<br /><br /> 5. Land areas reclaimed by a government corporation organized for the purpose of reclamation could not sell the reclaimed lands to private corporations. Alienable lands of the public domain shall be limited to agricultural lands.<br /> Private corporations or associations may to hold such alienable lands of the public domain except by lease, for a period not exceeding twenty-five years, renewable for not more than twenty-five years and not to exceed one thousand hectares in area. [1987 Constitution, Art. XII, Sec. 3, 1st par., 3rd and 4th sentences; Chavez v. Public Estates Authority, 384 SCRA 152 (2002)]<br /><br /> 6. The exploration, development, and utilization of natural resources shall be under the full control and supervision of the State. (Art. XII, Sec. 2, 1st par., 3rd sentence)<br /><br /> 7. The State may directly undertake such activities, or it may enter into co-production, joint venture, or production-sharing agreements, with Filipino citizens, or corporations or associations at least sixty per centum of whose capital is owned by such citizens. (Ibid., 4th sentence)<br /> Such agreements may be for a period not exceeding twenty-five years, renewable for not more than twenty-five years, and under such terms and conditions as may be provided by law. In cases of water rights for irrigation, water supply, fisheries, or industrial uses other than the development of water power, beneficial use may be the measure and limit of the grant. (Ibid., 5th and 6th sentences)<br /><br /> 8. The President may enter into agreements with foreign corporations involving either technical or financial assistance for large scale exploration, development and utilization of minerals, petroleum, and other mineral oils according to the general terms and conditions provided by law, based on real contributions to the economic growth and general welfare of the country. In such agreements, the State shall promote the development and use of local scientific and technical resources.<br /> The President shall notify the Congress of every contract entered into in accordance with this provision, within thirty days from its execution. (Art. XII, Sec. 2, 4th and 5th par.)<br /><br /> 9. The 1987 Constitution specifically declares that all lands of the public domain, waters, fisheries and other natural resources belong to the State. Included are fishponds, which may not be alienated but merely leased. Possession thereof, no matter how long, cannot ripen into ownership. ( Menchavez, e al., v. Teves, Jr., G.R. No. 153201, January 26, 2005 citing Republic of the Philippines v. Court of Appeals, 374 Phil. 209, 219; 315 SCRA 600, September 30, 1999)<br /> <br /> 10. The agreement of co-shareholders to mutually grant the right of first refusal to each other, by itself, does not constitute a violation of the provisions of the Constitution limiting land ownership to Filipinos and Filipino corporations.<br /> In fact, it can even be said that if the foreign shareholdings of a landholding corporation exceeds 40%,it is not the foreign stockholders’ ownership of the shares which is adversely affected but the capacity of the corporation to own land - that is, the corporation becomes disqualified to own land. (J.G. Summit Holdings, Inc. v. Court of Appeals, et al., G. R. No. 124293, January 31, 2005)<br /><br /> 11. No law disqualifies a person from purchasing shares in a landholding corporation even if the latter will exceed the allowed foreign equity, what the law disqualifies is the corporation from owning land. <br /> The constitutional prohibition applies only to ownership of land. It does not extend to immovable or real property as defined under Article 415 of the Civil Code. Otherwise, we would have a strange situation where the ownership of immovable property such as trees, plants and growing fruit attached to the land would be limited to Filipinos and Filipino corporations only. (J.G. Summit Holdings, Inc. v. Court of Appeals, et al., G. R. No. 124293, January 31, 2005)<br /><br /> 12. The “Filipino First” or “preferential use” concept mandates that the State shall promote the preferential use of Filipino labor, domestic materials and locally produced goods, and adopt measures that help make them competitive. (Sec. 12, Article XII, 1987 Constitution)<br /><br /> 13. The statutory grant of tax and duty-free importation into the Subic Special Economic Zone does not violate the “preferential use” concept of the Constitution because it allows an exchange on the basis of equality and reciprocity, frowning only in foreign competition that is unfair. (Coconut Oil Refiners Association, Inc., etc., et al., v. Torres, etc., et al., G. R. No. 132527, July 29, 2005 citing Tanada v. Angara, G. R. No. 118295, May 2, 1997, 272 SCRA 18)<br /> <br /> 14. Granting proprietary protection for the active ingredient of a pesticide for seven years from the date of such registration does not constitute an unlawful restraint of trade which violates the concept of free enterprise enshrined in the Constitution because there is implied a reservation to the government of the power to intervene whenever necessary to promote the general welfare [First Management Association of the Philippines (PMAP) v .Fertilizer and Pesticide Authority (FPA), G. R. No. 156041, February 21, 2007 citing Association of Coconut Desicators v. Philippine Coconut Authority, 349 Phil. 782; 286 SCRA 109 (1998)] considering that the unregulated use and proliferation of pesticides would be hazardous to our environment.<br /><br /> 15. The mere fact that incentives and privileges are granted to certain enterprises to the exclusion of others does not render the issuance unconstitutional for espousing unfair competition. [First Management Association of the Philippines (PMAP) v .Fertilizer and Pesticide Authority (FPA), G. R. No. 156041, February 21, 2007, citing Coconut Oil Refiners Association, Inc., v. Torres, G. R. No. 132527, July 29, 2005, 465 SCRA 47, 78]<br /><br /> 16. A Japanese national may practice medicine in the Philippines on the basis of reciprocity.. (Board of Medicine, et al., v. Ota, G.R. No. 166097, July 14, 2008)<br /><br /> Art. XIII. SOCIAL JUSTICE AND HUMAN RIGHTS<br /><br /> LABOR<br /><br /> AGRARIAN AND NATURAL RESOURCES REFORM<br /><br /> URBAN LAND REFORM AND HOUSING<br /><br /> HEALTH<br /><br /> WOMEN<br /><br /> ROLE AND RIGHTS OF PEOPLE’S ORGANIZATIONS<br /><br />HUMAN RIGHTS<br /><br /> 1. Human rights are the basic natural rights which inherent man because of his humanity. The right to life, dignity and existence may be considered as human rights.<br /><br /> 2. Demolition of squatter shanties and other illegal structures do not involve human rights as they impede the flow of traffic, and pose a danger to life and limb. (Simon v., Commission on Human Rights, 299 SCRA 117)<br /><br /> 3. The Commission on Human Rights does not have the power to issue injunctive writs. (Export Processing Zone Authority v. Commission on Human Rights, 208 SCRA 125) or cease and desist orders because it does not perform adjudicative powers. (Ibid.)<br /><br /> 4. The Commission on Human Rights has limited power of contempt. It may cite for contempt only for violation of its operational guidelines and rules of procedure that are essential to carry out its investigatorial powers. (Simon v., Commission on Human Rights, 299 SCRA 117)<br /><br /><br /> Art. XIV. EDUCATION, SCIENCE AND TECHNOLGY, ARTS, CULTURE AND SPORTS<br /><br />EDUCATION<br /><br /> 1. Academic freedom has two aspects:<br /> a. Academic freedom of institutions of higher learning; and<br /> b. Academic freedom of teachers, students and researchers.<br /><br /> 2. Scope of academic freedom of institutions of higher learning. Includes the freedom to determine who may teach, what may be taught, how it shall be taught and who may be admitted to study. (Garcia v. Faculty of Admissions, 68 SCRA 277)<br /> Academic freedom grants institutions of higher learning the discretion to formulate rules for the granting of honors and to close a school.<br /><br /> 3. Scope of academic freedom of teachers, students and researchers. The freedom of a faculty member to pursue his studies in his particular specialty and thereafter to make known or publish the result of his endeavours without fear that retribution would be visited on him in the event that his conclusions are found distasteful or objectionable by the powers that be, whether in the political, economic or academic establishments. (Reyes v. Court of Appeals, 194 SCRA 402)<br /><br /> 4. The scope of academic freedom under the 1973 Constitution has been expanded by the 1987 Constitution.<br /> Under the 1973 Constitution, “All institutions of higher learning shall enjoy academic freedom.” [Art. XV, Sec. 8(2)]<br /> The above concept was expanded under the 1987 Constitution which states that, “Academic freedom shall be enjoyed in all institutions of higher learning.” [Art. XIV, Sec. 5 (2)]<br /> The textual changes in the 1987 Constitution means that academic freedom will not only be enjoyed by the institutions of higher learning, but also by those who make them up such as teachers, students and researchers. (Record of the Constitutional Commission, Vol.1V, p. 439)<br /><br /> 5. At the option express in writing by the parents or guardians religion shall be allowed to be taught to their children or wards in public elementary and high schools within the regular class hours by instructors designated or approved by the religious authorities of the religion to which the children or wards belong , without additional cost to the Government. [1987 Constitution, Art. XIV, Sec. 3 (3)]<br /><br /> 6. Control and administration of educational institutions shall be vested in citizens of the Philippines. (1987 Constitution, Art. XIV, Sec. 4 (2), 2nd par.)<br /> 7. Limitation as to aliens. No educational institution shall be established exclusively for aliens and no group of aliens shall comprise more than one-third of the enrolment in any school. The provisions of this subsection shall not apply to schools established for foreign diplomatic personnel and their dependents and, unless otherwise provided by law, for other foreign temporary residents. (1987 Constitution, Art. XIV, Sec. 4 (2), 3rd par.)<br /><br />LANGUAGE<br /><br /> 1. For purposes of communication and instruction, the official languages of the Philippines are Filipino and, until otherwise provided by law, English. (Art. XIV, Sec. 7, 1st par.)<br /><br /> 2. English may be changed but not Filipino. The Proviso of ”until otherwise provided by law” refers to English and not to Filipino.<br /><br /> 3. Spanish and Arabic shall be promoted on a voluntary and optional basis. (Art. XIV, Sec. 7, 3rd par.)<br /><br /> SCIENCE AND TECHNOLOGY<br /><br /> ARTS AND CULTURE<br /><br /> SPORTS<br /><br /> Art. XV. THE FAMILY<br /><br /> Art. XVI. GENERAL PROVISIONS<br /><br /> 1. The flag of the Philippines shall be red, white, and blue, with a sun and three stars, as consecrated and honoured by the people and recognized by law. (Art. XVI, Sec. 1) which may not be changed or removed by mere statute. <br /><br /> Art. XVII. AMENDMENTS OR REVISIONS<br /><br /> 1. The various modes of revising or amending the Philippine Constitution are through<br /> a. a constituent assembly,<br /> b. constitutional convention or<br /> c. people’s initiative. (1987 Constitution, Art. XVII, arrangement and numnbering supplied)<br /> <br /> 2. Congress as a constituent assembly may by three-fourths vote of all its Members propose any amendment to or revision of the Constitution. (1987 Constitution, Art. XVII, Sec. 1)<br /><br /> 3. Congress may by a vote of two-thirds of all its Members may call a constitutional convention or by a majority vote of all its Members submit the question of calling such a convention to the electorate. (1987 Constitution, Art. XVII, Sec. 3)<br /><br /> 4. The people may directly propose amendments to the Constitution through initiative upon a petition of at least twelve percent of the total number of registered voters, of which every legislative district must be represented by at least three per cent of the registered voters therein. (Art. XVII, Sec. 2, Ibid.)<br /><br /> 5. The phrase “vote of all its Members” should be taken to mean the vote of the members of the Senate and the House of Representatives voting separately because it is inherent in a bicameral legislature for the two houses to vote separately. (III Record of the Constitutional Commission, p. 493)<br /><br /> Art. XVIII. TRANSITORY PROVISIONS<br /><br />ADMINISTRATIVE LAW AND LAW ON PUBLIC OFFICERS EXCLUDE: IMPLEMENTING RULES AND REGULATIONS OF DIFFERENT AGENCIES<br /><br />LAW ON PUBLIC OFFICERS<br /><br /> 1. The career service is characterized by:<br /> a. entrance based on merit and fitness to be determined as far as practicable by competitive examination or based on highly technical qualifications;<br /> b. opportunity for advancement to higher career positions; and<br /> c. security of tenure. (Book V, Title I, Chapter 2, Sec. 7, Administrative Code of 1997)<br /><br /> 2. The career service includes:<br /> a. Open career positions for appointment to which prior qualifications in an appropriate examination is required;<br /> b. Closed career positions which are scientific or highly technical in nature;<br /> c. Positions in the career executive service;<br /> d. Career officers other than those in the career executive service, who are appointed by the President;<br /> e. Commissioned officers and enlisted men of the Armed Forces;<br /> f. Personnel of government-owned or controlled corporations, whether performing governmental or proprietary functions, who do not fall under the non-career service; and<br /> g. Permanent laborers, whether skilled, semi-skilled, or unskilled.<br /> <br /> 3. Not covered by the civil service law are government and controlled corporations organized under the Corporation Code because they are covered under the Labor Code. Those with original charters (by direct legislative creation), are covered by the civil service laws. (Gamogamo v. PNOC Shipping and Transit Corporation, 381 SCRA 742)<br /><br /> 4. Demotion is the movement from one position to another involving the issuance of an appointment with diminution in duties, responsibilities, status, or rank which may or may not involve reduction in salary. (Domingo, et al., v. Carague, et al., G. R. No. 161065, April 15, 2005 citing Fernando v. Sto. Tomas, G. R. No. 112309, July 29, 1994, 234 SCRA 546, 552)<br /> A demotion by assigning an employee to a lower position in the same service which has a lower rate of compensation is tantamount to removal, if no cause is shown for it. (Ibid., citing Department of Transportation and Communications v. Civil Service Commission, G.R. Nos. 89325-26, 90033, October 3, 1991)<br /><br /> 5. “All public officers and employees shall take an oath or affirmation to uphold and defend the Constitution.” (Art. IX-B, Sec. 4)<br /> <br /> 6. Security of tenure means that an officer or employee in the Civil Service shall not be suspended or dismissed except for cause as provided by law and after due process.<br /><br />7. Re-election of a local official would render a pending administrative case moot and academic.<br /> A municipal mayor cannot be removed from office for his misconduct committed during his prior term because each term is separate and the people by re-electing him are deemed to have forgiven his misconduct. (Aguinaldo v. Santos, 212 SCRA 768) <br /><br /> 8. The appointment for a fixed period “unless sooner terminated” refers to a fixed term hence the appointee could not be terminated earlier than the fixed period except for just and authorized causes because this would violate security of tenure.<br /><br /> 9. An elected local official must be a Filipino citizen at the time of his proclamation and at the start of his term. This is to ensure that no person owing allegiance to a foreign country shall govern our [people and a unit of the Philippine territory. (Frivaldo v. Commission on Elections, 257 SCRA 727)<br /><br /> 10. Resignation implies an expression of the incumbent in some form, express or implied, of the intention to surrender, renounce and relinquish the office and the acceptance by competent and lawful authority. [Republic, et al., v. Singun, G. R. No. 149356, March 14, 2008 citing Gamboa v. Court of Appeals, 194 Phil. 624; 108 SCRA 1 (1981)])<br /><br /> 11. Elements of a complete and operative resignation from public office:<br /> a. an intention to relinquish a part of the term;<br /> b. an act of relinquishment; and<br /> c. an acceptance by the proper authority. [Republic, et al., v. Singun, G. R. No. 149356, March 14, 2008 citing Gamboa v. Court of Appeals, 194 Phil. 624; 108 SCRA 1 (1981)])<br /><br /> 12. Acceptance requires notification. The incumbent official would not be in a position to determine the acceptance of his resignation unless he had been duly notified. [Republic, et al., v. Singun, G. R. No. 149356, March 14, 2008 citing Gamboa v. Court of Appeals, 194 Phil. 624; 108 SCRA 1 (1981)])<br /><br /> 13. Until the resignation is accepted, the tender or offer to resign is revocable. [Republic, et al., v. Singun, G. R. No. 149356, March 14, 2008 citing Joson III v. Nario, G. R. No. 91548, 13 July 1990, 187 SCRA 453)<br /><br /><br /><br />ADMINISTRATIVE LAW<br /><br /> 1. Some of the grounds for proceeding against an employee in the civil service:<br /> a. Grave or simple misconduct;<br /> b. Discourtesy;<br /> c. Wilful failure to pay just debts.<br /> d. Habitual absenteeism;<br /> e. Habitual tardiness;<br /> <br /> 2. To constitute an administrative offense, misconduct should relate to or be connected with the performance of the official functions and duties of a public officer. [Civil Service Commission v. Belagan, G.R. No. 132164, October 19, 2004 citing Lacson v. Roque, 92 Phil. 456 (1953)]<br /><br /> 3. Simple misconduct is a transgression of some established and definite rule of action, more particularly, unlawful behavior, or gross negligence by a public officer. [Sison v. Morales-Malaca, G.R. No. 169931, March 12, 2008 citing Civil Service Commission v. Ledesma, G.R. No. 154521, 30 September 2005, 471 SCRA 589, 603 in turn citing Civil Service Commission v. Lucas, 361 Phil. 486; 301 SCRA 560 (1999)]<br /> Misconduct means intentional wrongdoing or deliberate violation of a rule of law or standard of behavior, especially by a government official (Civil Service Commission v. Belagan, G.R. No. 132164, October 19, 2004 citing Maguad v. de Guzman, A.M. No. P-94-1015,March 29, 1999, 305 SCRA 469)<br /><br /> 4. Grave misconduct if the act violates the law or disregard of established rules, which must be proved by substantial evidence. (Valera, etc., v. Office of the Ombudsman, etc., et al., G.R. No. 167278, February 27, 2008)<br /> In grave misconduct, the acts complained of are corrupt or inspired by an intention to violate the law, or constitute a flagrant disregard of well-known legal rules. <br /> It is a transgression of some established and definite rule of action, a forbidden act, a dereliction of duty, willful in character and implies wrongful intent and not a mere error in judgment. [Baquero v. Sanchez, etc., A.M.No.P-051974 April 6, 2005 (OCA-I.P.I. No. 03-1684-P citing various cases]<br /><br /> 5. In grave misconduct as distinguished from simple misconduct, the elements of corruption, clear intent to violate the law or flagrant disregard of established rule, must be manifest. [Civil Service Commission v. Belagan, G.R. No. 132164, October 19, 2004 citing Civil Service Commission v. Lucas, 361 Phil. 486; 301 SCRA 560 (1999)] <br /><br /> 6. Corruption as an element of grave misconduct consists in the act of an official or fiduciary person who unlawfully and wrongfully uses his station or character to procure some benefit for himself or for another persons, contrary to duty and the rights of others. (Civil Service Commission v. Belagan, G.R. No. 132164, October 19, 2004 citing Black’s Law Dictionary, p. 345)<br /><br /> 7. Grave misconduct is punishable by dismissal from the service with forfeiture of all benefits, excluding leave credits, if any and with prejudice to re-employment in any branch or agency of the government, including government-owned or controlled corporations. [Baquero v. Sanchez, etc., A.M.No.P-051974 April 6,2005 (OCA-I.P.I. No. 03-1684-P) citing Civil Service Law, Subtitle A, Title I, Book V of E.O. 292, otherwise known as the Administrative Code of 1991, amended by the Uniform Rules on Administrative Cases in the Civil Service dated 31August 1999]<br /><br /> 8. Discourtesy on the part of a government employee is a ground for disciplinary action because a public officer is bound, in the performance of his official duties, to observe courtesy, civility, and self-restraint in his dealings with others. . Under Rule XIV, Section 23 of the Civil Service Law and Rules, a first offense of discourtesy, which is a light offense, in the course of one’s official duties shall be meted the penalty of reprimand. [Sison v. Morales-Malaca, G.R. No. 169931, March 12, 2008 citing Perez v. Cunting, 436 Phil. 618, 625; 388 SCRA 55, 60 (2002)]<br /><br /> 9. An officer or employee in the civil service shall be considered habitually absent if “he incurs unauthorized absences exceeding the allowable 2.5 days monthly leave credits under the leave law for at least three (3) months in a semester or at least three (3) consecutive months during the year.” [Sec. 23 (q), Rule XIV of the Omnibus Rules Implementing Book V of Executive Order No. 292 cited in Escasinas, Jr., v. Lawas, etc., A. M. No. P-06-2284, December 19, 2006. (Formerly OCA I.P.I. No .05-2252-P)]<br /><br /> 10. The imposable penalty for habitual absenteeism is suspension for six (6) months and one (1) day to one (1) year for the first offense, and by dismissal for the second offense. [Sec. 23 (q), Rule XIV of the Omnibus Rules Implementing Book V of Executive Order No. 292]<br /><br /> 11. An employee shall be considered habitually tardy if “he incurs tardiness, regardless of the number of minutes, ten times a month for at least two (2) months in a semester or at least two (2) consecutive months during the year.” [Sec. 23 (a), Rule XIV of the Omnibus Rules Implementing Book V of Executive Order No. 292 cited in Escasinas, Jr., v. Lawas, etc., A. M. No. P-06-2284, December 19, 2006. (Formerly OCA I.P.I. No .05-2252-P)]<br /><br /> 12. The penalty for habitual tardiness is reprimand for the first offense, suspension for one (1) day to thirty (30) days for the second offense, and dismissal for the third offense. [Sec. 23 (a), Rule XIV of the Omnibus Rules Implementing Book V of Executive Order No. 292]<br /><br /> 13, Under Civil Service Rules, if the respondent is found guilty of two or more charges, the penalty to be imposed should be that corresponding to the most serious charge and the rest will be considered aggravating circumstances. (Badoles-Algodon v. Zaldivar, etc., A.M. No. P-04-1818, August 3, 2006 citing Revised Rules on Administrative Cases in the Civil Service, Sec. 55, Rule IV)<br /><br /> 14. Administrative proceedings against public officials and employees relating or incidental to, or in connection with the performance of their duties are necessarily impressed with public interest. (Autencio v. City Administrator, etc., et al., G. R. No. 152752, January 19, 2005 citing Sy v. Academia, 198 SCRA 705,July 3, 1991)<br /><br /> 15. Legal effects of administrative proceedings being impressed with public interest:<br /> a. Withdrawal by the complainant of the administrative charge does not necessarily result in the dismissal of the complaint and will not free respondent from his administrative liability if warranted by the evidence. For administrative actions are not made to depend upon the will of the complainant who, for one reason or another, condones a detestable act. [Ito v. Vera, etc., et al., A.M. No. P-01-1478, December 13, 2006 (Formerly OCA I.P.I. No. 00-789-P)]<br /> b. The technical rules that are applicable to ordinary civil and criminal cases do not find application. Thus, the technical rules of evidence are not followed and formal or trial-type proceedings need always be adhered to.<br /> <br /> 16. Administrative proceedings are akin to criminal prosecutions in the sense that no compromise may be entered into between the parties as regards he penal sanction. Complainants are not vested with the power of removal or suspension. That prerogative belongs to the proper government officials. This is so because of the need to maintain the faith and confidence of the people in the government demands that the proceedings in administrative cases should not be made to depend on the whims and caprices of complainants. (Autencio v. City Administrator, etc., et al., G. R. No. 152752, January 19, 2005)<br /><br /> 17. Role of complainant in administrative proceedings. They are just witnesses. (Autencio v. City Administrator, etc., et al., G. R. No. 152752, January 19, 2005 citing Estreller v. Manalad, Jr., 335 Phil. 1077; 268 SCRA 608, February 21, 1997)<br /> <br /> 18. The settled rule is that reliance is placed by courts on the factual findings of administrative agencies by reason of the special knowledge and expertise over matters falling within their jurisdiction, being in a better position to pass judgment thereon. <br /> Such factual findings are generally accorded great respect, if not finality, by the courts, as long as they are supported by substantial evidence, even if such evidence might not be overwhelming or even preponderant. It is not the task of an appellate court to weigh once more the evidence submitted before the administrative body and to substitute its own judgment for that of the administrative agency in respect of sufficiency of evidence. (Heirs of Wenceslao Tabia v. Court of Appeals, et al., G. R. Nos. 129377 & 129399, February 22, 2007)<br /><br /> 19. The Supreme Court yields to the precept of administrative law. There may be an instance when, pursuant to prudence and judicial restraint, a tribunal’s zeal in bestowing compassion must yield to the precept in administrative law that in [the] absence of grave abuse of discretion, courts are loathe to interfere with and should respect the findings of quasi-judicial agencies in fields where they are deemed and held to be experts due to their special technical knowledge and training. (Government Service Insurance System v. Fontanares, G. R. No. 149571, February 21, 2007)<br /><br /> 20. Courts of justice should respect the findings of act of administrative agencies, unless there is absolutely no evidence in support thereto or such evidence is clearly, manifestly and patently insubstantial. (Diesel Construction Co., Inc. v. UPSI Property Holdings, Inc., G. R. No. 1544885, March 24, 2008 and companion case citing Blue Bar Coconut Philippines v. Tantuico, No. L-47051, July 13, 1988, 163 SCRA 716, 729, citations omitted)<br /><br /> 21. Requirements of administrative complaint against civil servants. They must be written in a clear, simple and concise language and in a systematic manner, otherwise the same shall be dismissed. [Rivera v, Mendoza, etc., et al., A.M. No. RTJ- 06 – 2013, August 4, 2006 (OCA – I.P.I. No. 06-2509-RTJ) citing the Uniform Rules on Administrative Cases in the Civil Service, Rule II, Sec. 8]<br /> <br /> 22. Complaint in Administrative Cases in the Civil Service. Complaint. – A complaint against a civil service official or employee shall not be given due course unless it is in writing and subscribed and sworn to by the complainant., However, in cases initiated by the proper disciplining authority, the complaint need not be under oath.<br /> No anonymous complaint shall be entertained unless there is obvious truth or merit in the allegations therein or supported by documentary or direct evidence, in which case the person complained of may be required to comment.<br /> The complaint should be written in a clear, simple and concise language and in a systematic manner as to apprise the civil servant concerned of the nature and cause of the accusation against him and to enable him to intelligently prepare his defense or answer. (Uniform Rules on Administrative Cases in the Civil Service, Rule II, Sec. 8]<br /><br /> 23. Procedure for conduct of administrative investigation of employees in the Civil Service and remedies of employees during such investigations. “After a finding of a prima facie case, the disciplining authority shall formally charge the person complained of. The formal charge shall contain a specification of charge(s), a brief statement of material and relevant facts , accompanied by certified true copies of he documentary evidence, if any, sworn statements covering the testimony of witnesses, a directive to answerthecharge9s) in writing under oath in not less than seventy-two (72) hours from receipt thereof, an advice for the respondent to indicate in his answer whether or not he elects a formal investigation of the charge(s) and a notice that he is entitled to be assisted by a counsel of his choice.<br /> If the respondent has submitted his comment and counter affidavits during the preliminary investigation, he shall be given the opportunity to submit additional evidence.<br /> The disciplining authority shall not entertain requests for clarification, bills of particulars or motions to dismiss which are obviously designed to delay the administrative proceedings. If any of these pleadings are introduced by the respondent, the same shall be considered as an answer and shall be evaluated as such.” (J. Callejo, Sr., Rubio, Jr. v. Paras, etc. G. R. No. 156047, April 12, 2005 citing Section 16 of the Uniform Rules on Administrative Cases in the Civil Service)<br /> Sec. 21 of the same Uniform Rules also provides, Remedies from the Order of Preventive Suspension.- The respondent may file a motion for reconsideration with the disciplining authority or may elevate the same to the Civil Service Commission by way of an appeal within fifteen (15) days from the receipt thereof.” (J. Callejo, Sr., Rubio, Jr.,supra)<br /> However, a motion for reconsideration may not be adequate and speedy; hence, may be dispensed with by the aggrieved party who may file the appropriate judicial recourse, (J. Callejo, Sr., Rubio, Jr., supra) usually through a petition for certiorari under Rule 65 of the Rules of Court.<br /> <br /> 24. The body or agency that first takes cognizance of the complaint shall exercise jurisdiction to the exclusion of the others. (Rubio, Jr., v. Paras, etc., G. R. No. 156047, April 12, 2005 citing Carlos v. Angeles, G.R. No. 142907, 29 November 2000, 346 SCRA 571)<br /> <br /> 25. Essence of due process in administrative proceedings. In administrative proceedings, the filing of charges and giving reasonable opportunity for the person so charged to answer the accusations against him constitute the minimum requirements of due process. As long as a party is given the opportunity to defend his interests in due course, he was denied due process. [Cayago, et al., v. Lina, etc., G. R. No. 149539, January 19, 2005 citing Rodriguez v. Court of Appeals, 386 SCRA 492 (2002)]] <br /><br /> 26. Any seeming defect in the observance of due process is cured by the filing of a motion for reconsideration. A formal or trial-type hearing is not at all times and in all instances essential. <br /> The requirements are satisfied where the parties are afforded reasonable opportunity to explain their side of the controversy at had. What is frowned upon is the absolute lack of notice and hearing. [Cayago, et al., v. Lina, etc., G. R. No. 149539, January 19, 2005 citing Zacarias v. National Police Commission, 414 SCRA 387 (2003)]<br /> <br /> 27. To raise laches or the first time before he Supreme Court would plainly violate the basic rule of fair play, justice and due process. [Department of Education, Culture and Sports, v. del Rosario, et al., G. R. No. 146586, January 26, 2005 citing Sanchez v. The Hon. Court of Appeals, 345 Phil. 155; 279 SCRA 647 (1997)]<br /> <br /> 28. Order suspending a government employee may be immediately brought to court without exhaustion of administrative remedies because it is immediately executory, would cause irreparable injury (University of the Philippines Board of Regents v. Rasul, 200 SCRA 685) , and the issue of whether suspension is proper is purely legal. (Azarcon v. Bunagan, 399 SCRA 365). <br /><br /> 29. Payment of backwages to suspended employee is proper if found innocent from all the charges and the suspension is unjustified. (Civil Service Commission v. Rabang, G. R. No. 167763, March 14, 2008 citing Bruguda v. Secretary of Education, Culture and Sports, G.R. Nos. 142332-43, January 31, 2005, 450 SCRA 224, 231)<br /> No backwages if charged with charged with gross neglect but found liable for simple neglect as not exonerated from liability. (Civil Service Commission, supra)<br /><br /> 30. The Commission on Audit cannot disallow the payment of backwages to a government employee to an employee who has been found innocent from all charges for the following reasons:<br /> a. The Commission on Audit cannot set aside the decision of the Civil Service Commission;<br /> b. The payment of backwages to an illegally dismissed government employee is an irregular, unnecessary, excessive, extravagant (IUEE) or unconscionable expenditure that may be disallowed. [Uy v. Commission on Audit, 328 SCRA 607 (2000)]<br /><br /> 31. Appeal shall not stop the decision from being executory, and in case the penalty is suspension or remval, the respondent shall be considered as having been under preventive suspension during the pendency of the appeal in the event he wins an appeal. [Civil Service Commission v. Rabang, G. R. No. 167763, March 14, 2008 citing Sec. 47 (4), ,Chapter 6, Subtitle A, Title I, Book V of the Administrative Code of 19897]<br /><br /> 32. Concept of exhausting administrative remedies. If a remedy within the administrative machinery is still available, with a procedure pursuant to law, for an administrative officer to decide the controversy, a party should first exhaust such remedy before going to court. A premature invocation of a court’s intervention renders the complaint without a cause of action and dismissable on such ground. (Estrada, et al., v. Court of Appeals, et al., G.R. No. 137862, November 11, 2004 citing Bangus Fry Fisherfolk v. Lanzanas, G.R. No. 131442, July 10, 2003, 405 SCRA 530)<br /> <br /> 33. Purpose of the doctrine. The tribunal, either judicial or quasi-judicial must be given a chance to correct the imputed errors on its act or order. (Rubio, Jr., v. Paras, etc., G. R. No. 156047, April 12, 2005 citing Pefianco v. Moral, G. R. No. 132248, January 2000, 322 SCRA 439)<br /> Prior availment of administrative remedies entails lesser expenses and provides for a speedy disposition of controversies. Comity and convenience also impel courts of justice to shy away from a dispute until the system of administrative redress has been completed and complied with. (Estrada, et al., v. Court of Appeals, et al., G.R. No. 137862, November 11, 2004 citing Paat v. Court of Appeals, G.R. No. 111107,January 10, 1997, 266 SCRA 167, 175-176)<br /><br /> 34. Exhaustion is to be invoked only where the exercise is that of quasi-judicial functions not in the exercise of quasi-legislative power. <br /> In questioning the validity or constitutionality of a rule or regulation issued by an administrative agency, a party need not exhaust administrative remedies before going to court. This principle, however, applies only where the act of the administrative agency concerned was performed pursuant to its quasi-judicial function, and not when the assailed act pertained to its rule-making or quasi-legislative power. [Holy Spirit Homeowners Association, Inc., et al, v. Defensor, etc., et al., G. R. No. 163980, August 3, 2006 citing Smart Communications, Inc. v. National Telecommunications Commission, 456 Phil. 145, 155; 408 SCRA 678, 686 (2003)]<br /><br /> 35. Exceptions to the doctrine of exhaustion of administrative remedies. The doctrine of exhaustion of administrative remedies is a relative one and its flexibility is conditioned on the peculiar circumstances of a case. There are a number of instances when the doctrine has been held to be inapplicable. Among the established exceptions are:<br /> 1) when there is a violation of due process;<br /> 2) when the issue involved is purely a legal question;;<br /> 3) when the administrative body is in estoppel;<br /> 4) when the act complained of is patently illegal and amounts to lack or excess of jurisdiction;<br /> 5) when the respondent is a department Secretary whose acts, as an alter ego of the President, bears the implied and assumed approval of the latter;<br /> 6) when to require exhaustion of administrative remedies would be unreasonable;<br /> 7) when it would amount to a nullification of a claim;<br /> 8) when there are circumstances indicating the urgency of judicial intervention and unreasonable delay would greatly prejudice the complainant;<br /> 9) when the subject matter is a private land in land case proceedings;<br /> 10) when no administrative review is provided by law;<br /> 11) when the claim involved is small;<br /> 12) when irreparable damage will be suffered;<br /> 13) when there is no other plain, speedy and adequate remedy;<br /> 14) when strong public interest is involved;<br /> 15) when the issue of non-exhaustion of administrative remedies has been rendered moot; and<br /> 16) in quo warranto proceedings. (Estrada, et al., v. Court of Appeals, et al., G.R. No. 137862, November 11, 2004 citing Social Security Commission v. Court of Appeals, G.R. 152058, September 27, 2004, 439 SCRA 239; Rubio, Jr., v. Paras, etc., G.R.No.156047, April 12,2005; Philippine Health Insurance Corporation v. Chinese General Hospital and Medical Center, G.R. No. 163123, April 15, 2005 citing Nachura and various cases) <br /> <br /> LAWS ON SUFFRAGE<br /><br /> PARTY- LIST LAW (R.A. No. 7941<br /><br />OMNIBUS ELECTION CODE OF THE PHILIPPINES (B.P. Blg. 881)<br /><br />ELECTORAL REFORMS LAW OF 1987 (R. A. No. 6646)<br /><br />R. A. No. 7166 – AN ACT PROVIDING FOR SYNCHONIZED NATIONAL AND LOCAL ELECTIONS AND FOR ELECTORAL REFORMS, as amended by R.A. No. 9369<br /><br /> 1. Suffrage may be exercised by:<br /> a. all Filipino citizens of the Philippines<br /> 1) not otherwise disqualified by law,<br /> b. who are at least eighteen years of age, and<br /> c. who shall have resided in the Philippines for at least one year and<br /> 1) in the place where they propose to vote for at least six months<br /> 2) immediately preceding the election. <br /> d. No literacy, property, or other substantive requirement shall be imposed on the exercise of suffrage. (Sec. 1, Article V, 1987 Philippine Constitution, paraphrasing and numbering supplied)<br /><br /> 2. Absentee voting refers to the process by which qualified citizens of the Philippines abroad exercise their right to vote. (Rep. Act 9189, the Overseas Absentee Voting Law)<br /><br /> 3. Overseas Absentee Voter. A citizen of the Philippines who is qualified to register and vote under this Act, not otherwise disqualified by law, who is abroad on the day of elections. (Rep. Act 9189, the Overseas Absentee Voting Law)<br /><br /> 4. Coverage, or who are allowed to vote under the Rep. Act No. 9189, the Overseas Absentee Voting Law. All citizens of the Philippines abroad, who are not otherwise disqualified by law, at least eighteen (18) years of age on the day of elections, may vote for president, vice-president, senators and party-list representatives.” (Sec. 4, Rep. Act No. 9189, the Overseas Absentee Voting Law)<br /><br /> 5. The right to vote under Republic Act No. 9189 the Overseas Absentee Voting Act of 2003 of a former Filipino citizen, a permanent resident of the U.S., who has re-acquired Philippine citizenship under Rep. Act No. 9225, the Citizenship Retention and Re-Acquisition Act of 2003 may not be questioned on the ground that he is not a resident of Philippines as so required under Sec. 1, Article V, of the 1987 Constitution.<br /> Reason: The whole point of Overseas Absentee Voting Act is precisely to enfranchise “dual citizens” with the right of suffrage thru the absentee voting scheme and as overseas absentee voters. (Nicolas-Lewis, et al., v. Commission on Elections, G. R. No. 1162759, August 4, 2006)<br /><br /> 5. Derivative Citizenship under Rep. Act No. 9225, the Citizenship Retention and Re-Acquisition Act of 2003. The unmarried child, whether legitimate, illegitimate or adopted, below eighteen (18) years of age, of those who re-acquire Philippine citizenship under this Act shall be deemed citizens of the Philippines. (Sec. 4, Rep. Act No. 9225, the Citizenship Retention and Re-Acquisition Act of 2003)<br /><br /> 6. The next generation of “duals” may avail themselves of the right to enjoy full civil and political rights including the right to vote, including the right of suffrage as an overseas absentee. (Obiter in Nicolas-Lewis, et al., v. Commission on Elections, G. R. No. 1162759, August 4, 2006)<br /> <br /> 7. Disqualifications to vote under the Rep. Act No. 9189, the Overseas Absentee Voting Law. The following shall be disqualified from voting under this Act:<br /> a. Those who have lost their Filipino citizenship in accordance with Philippine law unless they have re-acquired the same under Rep. Act No. 9225, the Citizenship Retention and Re-Acquisition Act of 2003;<br /> b. Those who have expressly renounced their Philippine citizenship and who have pledged allegiance to a foreign country unless they have re-acquired the same under Rep. Act No. 9225, the Citizenship Retention and Re-Acquisition Act of 2003;<br /> c. Those who have been convicted in a final judgment by a court or tribunal of an offense punishable by imprisonment of not less than one(1) year, including those who have been found guilty of Disloyalty as defined under Article 137 of the Revised Penal Code;<br /> d. An immigrant or permanent resident who is recognized as such in the host country, unless he/she executes upon registration, and affidavit prepared for the purpose by the Commission declaring that he/she shall resume actual physical permanent residence in the Philippines not later than three (3)years from approval of his/her registration under this Act. Such affidavit shall also state that he he/she has not applied for citizenship in another country. Failure to return shall be the cause for the removal of the name of the immigrant or permanent resident from the National Registry of Absentee Votes, and hi/her permanent disqualification to vote in absentia.<br /> e. Any citizen of the Philippines abroad previously declared insane or incompetent by competent authority. (Sec. 5, Rep. Act No. 9189, the Overseas Absentee Voting Law)<br /><br /> 8. The Congress shall design a procedure for the disabled and the illiterates to vote without the assistance of other persons. <br /> Until then, they shall be allowed to vote under existing laws and such rules as the Commission on Elections may promulgate to protect the secrecy of the ballot. (2nd par., Sec. 2, Article V, 1987 Philippines Constitution)<br /><br /> 9. A pre-proclamation controversy refers to election question pertaining to or affecting the proceedings of the Board of Canvassers that may be raised by any candidate or by any registered political party or coalition of political parties before the Board of directly with the Comelec, or any matter raised in relation to the preparation, transmission, receipt, custody and appreciation of the election returns (B. P. Blg. 881, Sec. 241) and certificates of canvass. (as amended by R.A. No. 7166, 9369)<br /><br /> 10. Procedure, in general, on how pre-proclamation controversies are initiated, heard, and finally resolved. <br /> a. Questions affecting the composition or proceedings of the Board of Canvassers or directly with the Commission.<br /> b. Questions involving the election returns and the certificates of canvass shall be brought in the first instance before the Board of Canvassers only. (R. A. No. 7166, Sec. 20)<br /> c. Any party adversely affected may appeal to the Commission on Elections. (Ibid.)<br /> All pre-proclamation controversies pending before the Commission on Elections shall be deemed terminated at the beginning of the term of office involved and the rulings of the Board of Canvassers shall be deemed affirmed, without prejudice to the filing of an election protest. However, the proceedings may continue when on the basis of the evidence presented so far, the Commission on Elections or the Supreme Court determines that the petition appears to be meritorious. (R. A. No. 7611,Sec.16)<br /> d. The decision of the Commission on Elections may be brought to the Supreme Court on certiorari by the aggrieved party. (Art. IX-A, Sec. 7, 1987 Constitution)<br /><br /> 11. In elections for President, Vice-President, Senators and Members of the House of Representatives, the general rule still is that pre-proclamation cases on matters relating to the preparation, transmission, receipt, custody and appreciation of election returns or certificates of canvass are still prohibited. <br /><br /> 12. Exceptions: Instances where pre-proclamation cases are allowed for election of President, Vice-President, Senators and Members of the House of Representatives:<br /> a. correction of manifest errors;<br /> b. questions affecting the composition or proceedings of the board of canvassers; and<br /> c. determination of the authenticity and due execution of certificates of canvass as provided in Section 30 of Republic Act No. 7166, as amended by Republic Act No. 9369<br />.<br /> 13. The amendments introduced by Republic Act No. 9369, are specifically summarized as:<br /> a. the duty to determine the authenticity and due execution of certificates of canvass is now imposed, not only on Congress acting as the NBC for the election for President and Vice-President, but also on COMELEC en banc acting as the NBC for the election for Senators;<br /> b. the third criterion for the determination of the authenticity and due execution of the certificates of canvass requires the absence of discrepancy in comparison not only with other authentic copies of the said certificates, but also with the supporting documents, such as the statements of votes;<br /> c. a fourth criterion for the determination of the authenticity and due execution of the certificates of canvass was added, mandating the absence of discrepancy between the number of votes of a candidate in a certificate when compared with the aggregate number of votes appearing in the election returns of the precincts covered by the same certificate;<br /> d. pursuant to the exception now provided in Section 15 of Republic Act No. 7166, as amended by Republic Act No. 9369, permissible pre-proclamation cases shall adopt and apply the procedure provided in Sections 17 to 20 of the same statute; and<br /> e. the use of a simulated copy of an election return, certificate of canvass, or statement of vote, or a printed copy of said election documents bearing a simulated certification or image shall be penalized as an election offense. [Pimentel III, v. Commission on Elections, etc., et al., G.R. No. 178413, March 13, 2008]<br /> <br /> 14. The procedure to be followed for objecting to a certificate of canvass for Senatorial candidates.<br /> Any objection or manifestation concerning a certificate of canvass before the National Board of Canvassers (NBC), as well as any contest involving the inclusion or exclusion of an election return or certificate of canvass before a local board of canvassers, must be orally submitted to the Chairperson of the NBC or the local board of canvassers, as the case may be.<br /> Simultaneous with the oral submission, the party concerned must submit his written objection, manifestation, or contest in the form required. <br /> The objection, manifestation, or contest shall also be recorded in the minutes of the canvass. In the event that the NBC or local board of canvassers shall determine that there is a proper case for the objection, manifestation, or contest submitted, it shall automatically defer the canvass of the assailed election return or certificate of canvass. <br /> Within 24 hours from the submission of the objection, manifestation, or contest, the party concerned shall submit his evidence which shall be attached to his written objection, manifestation, or contest. Within the same 24-hour period, any party may file a written and verified opposition to the objection, manifestation, or contest. <br /> Upon receipt of the evidence, the NBC or the local board of canvassers shall take up the assailed election return or certificate of canvass, and after considering the objection, manifestation or contest, together with the opposition thereto and the evidences submitted, shall summarily and immediately rule thereon. [Pimentel III, v. Commission on Elections, etc., et al., G.R. No. 178413, March 13, 2008]<br /><br /> 15. Purpose of the above procedure. The afore-described procedure does not provide any party the opportunity to question and confront election officials and other witnesses. It may have been allowed on occasion by the boards of canvassers, but it does not necessarily ripen into a legally demandable right. <br /> Canvass proceedings are administrative and summary in nature. <br /> As for local boards of canvassers, in elections for Senators, they only need to determine the authenticity and due execution of the election returns or certificates of canvass on the face thereof. <br /> As for the COMELEC en banc, acting as the NBC, the determination of the authenticity and due execution of the certificates of canvass shall be limited only to those submitted before it by the local boards of canvassers and in accordance with the criteria provided in Section 30 of Republic Act No. 7166, as amended by Republic Act No. 9369. <br /> The limitations on the powers and duties of the boards of canvassers are meant to avoid any delay in the proclamation of the elected official. Issues whose resolution would require the presentation and examination of witnesses are more properly raised in a regular election protest. [Pimentel III, v. Commission on Elections, etc., et al., G.R. No. 178413, March 13, 2008]<br /><br /> 16. Kinds of election contests are Election protests and Quo warranto.<br /><br /> 17. Distinctions between an election protest from an action for quo warranto.<br /> a. An election protest contests the results of the election on grounds of fraud, terrorism, irregularities or illegal acts committed before, during, or after the casting and counting of ballots WHILE quo warranto proceedings contests the ineligibility or disloyalty to the Republic of the Philippines;<br /> b. An election protest may be filed by a losing candidate WHILE quo warranto proceedings may be brought by any person.<br /><br /> 18. Grounds for election protest. Fraud, terrorism, irregularities or illegal acts committed before, during or after the casting and counting of votes.<br /><br /> 19. An election protest is initiated by filing a protest containing the following allegations:<br /> a. The protestant is a candidate who duly filed a certificate of candidacy and was voted for in an election.<br /> b. The protestee has been proclaimed; and<br /> c. The date of the proclamation. (Miro v. Commission on Elections, 121 SCRA 466)<br /><br /> 20. The following have jurisdiction over election contests:<br /> a. Barangay officials - Municipal Trial Court, Metropolitan Trial Court, Municipal Circuit Trial Court, Municipal Trial Court in Chartered Cities.<br /> b. Municipal officials - Regional Trial Court<br /> c. Regional, provincial and city officials – Commission on Elections. [Art. IX-C, Sec. 2 (2), 1987 Constitution]<br /> d. Congressman - House of Representatives Electoral Tribunal<br /> e. Senators - Senate Electoral Tribunal. (Art. VI, Sec. 17, 1987Constitution)<br /> f. President and Vice President - The Supreme Court sitting as the Presidential Electoral Tribunal. (Art. VII, Sec.4, 1987 Constitution)<br /><br /> 21. Appeals of election contests: <br /> a. The decision of the inferior court in election contests involving the barangay officials and of the Regional Trial Court in election contests involving municipal officials are appealable to the Commission on Elections.[Art. IX-C,Sec.2(2), 1987 Constitution]<br /> b. The decision of the Commission on Elections in election contests involving barangay and municipal officials may be brought to the Supreme Court on certiorari on pure questions of law. (Rivera v. Commission on Elections, 199 SCRA 178)<br /> c. The decision of the Commission on Elections in election contests involving regional, provincial and city officials may be brought to the Supreme Court on certiorari. [Art. IX-A, Sec. 7 and Art. IX-C, Sec. 2(2), both of the 1987 Constitution]<br /> d. The decisions of the Senate Electoral Tribunal and of the House Electoral Tribunal may be elevated to the Supreme Court on certiorari if there was grave abuse of discretion. (Lazatin v. Commission on Elections, 168 SCCRA 391)<br /> <br /> 22. Once a winning candidate has been proclaimed, taken his oath, and assumed as a Member of the House of Representatives, COMELEC’s jurisdiction over election contests relating to his election, returns, and qualifications ends, and the HRET’s own jurisdiction begins. [Aggabao v. The Commission on Elections, et al., G.R. No. 163756, January 26, 2005 citing Guerrero v. Commission on Elections, 391 Phil. 344, 352; 336 SCRA 458 (2000)]<br /> Where a Congressional candidate has already been proclaimed, took his oath and assumed office, the opponent’s only recourse would have been to file an election protest before the HRET, and not a petition for certiorari with the Supreme Court. The issues are best addressed to the sound judgment and discretion of the electoral tribunal. (Aggabao v. The Commission on Elections, et al., supra)<br /> <br /> 23. Allegation of nullity of proclamation does not divest the HRET of its jurisdiction. Reason: It avoids duplicity of proceedings and a clash of jurisdiction between constitutional bodies, with due regard to the people’s mandate. [Aggabao v. The Commission on Elections, et al., G.R. No. 163756, January 26, 2005 citing Guerrero v. Commission on Elections, 391 Phil. 344, 352; 336 SCRA 458 (2000)]<br /><br /> 24. Despite alleged invalidity of proclamation of winning candidate, the COMELEC is deprived of its jurisdiction to hear the protest. It is a matter that is addressed to the sound judgment of the Electoral Tribunal. (Aggabao v. The Commission on Elections, et al., G.R. No. 163756, January 26, 2005 citing Lazatin v. Commission on Elections, G. R. No.80007, 25 January 1998, 391 Phil. 344, 352; 157 SCRA 337, 338)<br /><br /> 25. The widow of a deceased presidential candidate is not a real party in interest to have capacity to substitute through intervention before the Presidential Electoral Tribunal. <br /> A public office is personal to the public officer and not a property transmissible to the heirs upon death. (Poe, etc., v. Macapagal-Arroyo, P.E.T. Case No. 002, March 29, 2005 citing De Castro v. Commission on Elections, G. R. No. 125249, 7 February 1997, 267 SCRA 806, 809)<br /><br /> 26. It is true that a contest before electoral tribunals has two aspects:<br /> First, it is in pursuit of one’s right to a public office, and second, it is imbued with public interest which raises it to a plane over and above ordinary civil actions.<br /> However, if persons not real parties in an action could be allowed to intervene, proceedings will be unnecessarily complicated, expensive and interminable – and this is not the policy of the law. (Poe, etc., v. Macapagal-Arroyo, P.E.T. Case No. 002, March 29, 2005 citing Magsaysay-Labrador v. Court of Appeals, G. R. No. 58168, 19December 1989, 180 SCRA 266, 271) <br /> <br /> 27. Substitution of the protestant in election protests allowed only if substitute is a real party in interest. While the right to a public office is personal and exclusive to the public officer, an election protest is not purely personal and exclusive to the protestant or to the protestee such that the death of either would oust the court of all authority to continue with the proceedings. (Poe, etc., v. Macapagal-Arroyo, P.E.T. Case No. 002, March 29, 2005 citing De Castro v. Commission on Elections, G. R. No. 125249, 7 February 1997, 267 SCRA 806, 809) Hence, substitution and intervention was allowed but only by a real party in interest.<br /> Substitution by a vice-mayor was permitted, since he is a real party in interest considering that if the protest succeeds and the protestee is unseated, the vice-mayor succeeds to the office of the mayor that becomes vacant if the one duly elected cannot assume office. (Poe, etc., v. Macapagal-Arroyo, P.E.T. Case No. 002, March 29, 2005 citing Vda. De Mesa v. Mencias, No. L-24583, 29 October 1966, 18 SCRA 545 and Lomugdang v.Javier, No. L-27535, 30 September 1967, 21SCRA 402, 407)<br /><br /> 28. The constitutional function as well as the power and the duty to be the sole judge of all contests relating to the election, returns and qualifications of the President and Vice-President is expressly vested in the Presidential Electoral Tribunal (PET), in Section 4, Article VII of the Constitution. <br /> Included therein is the duty to correct manifest errors in the Statement of Votes (SOVs) and the Certificates of Canvass (COCs). (Legarda v. De Castro, P.E.T. Case No. 003, March 31, 2005)<br /><br /> 29. The candidate who obtained the second highest number of votes should not be proclaimed if the candidate with the highest number of votes was subsequently declared to be disqualified because he was not the choice of the people.<br /><br />PUBLIC CORPORATIONS<br /><br />LOCAL GOVERNMENT CODE (R. A. No. 7160) [BASICS AND EXCLUDE PROVISIONS RELATING TO LOCAL TAXATION]<br /><br /> 1. A local government is a “political subdivision of a nation or state which is constituted by law and has substantial control of local affairs.” (Metropolitan Manila Development Authority v. Garin, G.R. No. 130230, April 15, 2005 citing various sources)<br /><br /> 2. The various local government units are the provinces, cities, municipalities and barangays. (Metropolitan Manila Development Authority v. Garin, G.R. No. 130230, April 15, 2005)<br /><br />3. Metropolitan Manila Development Authority (MMDA) is not a local government unit or a public corporation endowed with legislative power, and unlike its predecessor, the Metro Manila Commission, it has no power to enact ordinances for the welfare of the community. MMDA can only enforce traffic laws and regulations validly enacted by the legislative bodies of the local government units comprising Metro Manila. (Metropolitan Manila Development Authority v. Garin, G.R. No. 130230, April 15, 2005 citing Metro Manila Development Authority v. Bel-Air Village Association, Inc., G. R. No. 135962, 27 March 2000, 328 SCRA 836)<br /><br />4. The MMDA is a development authority created for the purpose of laying down policies and coordinating with the various national government agencies, people’s organizations, non-governmental organizations and the private sector, which may enforce but not enact, ordinances. (Metropolitan Manila Development Authority v. Garin, G.R. No. 130230, April 15, 2005 citing Metro Manila Development Authority v. Bel-Air Village Association, Inc., G. R. No. 135962, 27 March 2000, 328 SCRA 836)<br /><br />5. Devolution is the act by which the National Government confers power and authority upon the various local government units to perform specific functions and responsibilities. [Local Government Code, Sec. 17 (e)]<br /><br /> 6. Police power is lodged with National Legislature which in turn may delegate it to local government units. Once delegated, the agents can exercise only such legislative powers as are conferred on them by the national lawmaking body.<br /> Our Congress has delegated police power to the LGUs in the Local Government Code of 1991. (Metropolitan Manila Development Authority v. Garin, G.R. No. 130230, April 15, 2005)<br /><br /> 7. The MMDA does not have the power to confiscate, suspend or revoke drivers’ licenses without a traffic law or regulation validly enacted by the legislature or those local government units to whom legislative powers have been delegated. <br /> Once there is such a law, MMDA is duty-bound to confiscate, suspend or revoke drivers’ licenses in the exercise of its mandate of transport and traffic management, as well as the administration and implementation of all traffic enforcement programs, traffic engineering services and traffic education programs. (Metropolitan Manila Development Authority v. Garin, G.R. No. 130230, April 15, 2005)<br /><br /> 8. License to operate motor vehicle is not a property right, but a privilege granted by the state which may be suspended or revoked by the state in the exercise of its police power, in the interest of public safety and welfare, subject to the procedural due process requirements. (Metropolitan Manila Development Authority v. Garin, G.R. No. 130230, April 15, 2005 relying upon Pedro v. Provincial Board of Rizal, 56 Phil. 123 (1931) on the license to operate a cockpit; Tan v. Director of Forestry , G. R. No. L-24548, 27 October 1983, 125 SCRA 302 and Oposa v. Factoran, G. R. No. 101083, 30 July 1993, 224 SCRA 792 on timber licensing agreements, and Surigao Electric Co., Inc. v. Municipality of Surigao, G. R. No. L -22766, 30 August 1968, 24 SCRA 898)<br /> It is the legislature in the exercise of police power, which has the power and responsibility to regulate how and by whom motor vehicles may be operated on the state highways. (Metropolitan Manila Development Authority v. Garin, G.R. No. 130230, April 15, 2005)<br /><br /> 9. The newly delegated powers to the Local Government Units (LGUs) pertain to the franchising and regulatory power theretofore exercised by the LTFRB and not to the functions of the LTO relative to the registration of motor vehicles and issuances for licenses for the driving thereof. <br /><br /> 10. A local government unit may, through its chief executive and acting pursuant to an ordinance, exercise the power to eminent domain for public use, or purpose, or welfare for the benefit of the poor and the landless upon payment of just compensation, pursuant to the provisions of the Constitution and pertinent laws. (Sec. 19, Local Government Code)<br /><br /> 11. The local government’s choice on what specific lots to expropriate should not be arbitrary. If there are other lots that are better and more appropriate, it should choose the same and not others. (Municipality of Meycauayan v. Intermediate Appellate Court, 157 SCRA 640)<br /><br /> 12. Before a local government unit may enter into the possession of the property sought to be expropriated, it must<br /> a. file a complaint for expropriation sufficient in form and substance before the proper court and<br /> b. deposit with the said court at least 15% of the property’s fair market value based on its current tax declaration.<br /> The law does not make the determination of a public purpose a condition precedent to the issuance of a writ of possession. [Francia, Jr., et al., v. Municipality of Meycauayan, G. R. No. 170432, March 24, 2008 citing City of Iloilo v. Legaspi, G. R. No. 154614, 25 November 2004, 444 SCRA 269, 283 in turn citing City of Manila v. Serrano, 412 Phil. 754, 763; 359 SCRA 231, 240 (2001)]<br /><br /> 13. For an ordinance to be valid, it must not only be within the corporate powers of the LGU to enact and be passed according to the procedure prescribed by law, it must also conform to the following substantive requirements:<br /> a. must not contravene the Constitution or any statute;<br /> b. must not be unfair or oppressive;<br /> c. must not be partial or discriminatory;<br /> d. must not prohibit but may regulate trade;<br /> e. must be general and consistent with public policy and<br /> f. must not be unreasonable. [Social Justice Society (SJS, et al., v. Atienza, Jr., etc., G.R. No. 156052, February 13, 2008) <br /><br /> 14. A law passed fixing the term of elective officials of local government units, except barangay officials, to four years is unconstitutional.<br /> The term of office of elective local officials, except barangay officials, which shall be determined by law, shall be three years and no such official shall serve for more than three consecutive terms. (Art. X, Sec. 8, 1st sentence)<br /><br /> 15. Voluntary renunciation of the office for any length of time shall not be considered as an interruption on the continuity of his service for the full term for which he was elected. (Art. X, Sec. 8, 2nd sentence)<br /><br /> 16. Persons who are disqualified, under the Local Government Code, from running for any elective local position:<br /> a. Those sentenced by final judgment for an offense involving moral turpitude or for an offense punishable by one (1) year or more of imprisonment, within two (2) years after serving sentence;<br /> b. Those removed from office as a result of an administrative case;<br /> c. Those convicted by final judgment for violating the oath of allegiance to the Republic;<br /> d. Those with dual citizenship;<br /> e. Fugitives from justice in criminal or nonpolitical cases here and abroad;<br /> f. Permanent residents in a foreign country or those who have acquired the right to reside abroad and continue to avail of the same right after the effectivity of the Local Government Code; and<br /> g. The insane or feeble-minded. (Sec. 40, Local Government Code)<br /><br /> 17. To qualify for an elective office, a person must be a resident of the locality for at least one year immediately before the election. [Sec. 39 (a), Local Government Code]<br /><br /> 18. A consecutive three term mayor of a municipality cannot run as mayor for a consecutive fourth term if the municipality is converted into a city. Despite the change in corporate personality of the municipality, the framers of the Constitution intended to avoid the evil of a single person accunmulating excessive power over a particular territory as a result of a prolonged stay in the same office. (Latusa v. Commission on Elections, 417 SCRA 601)<br /><br /> 19. A municipality may not be held liable for tort committed by a regular employee using a dump truck owned by it because the employee was discharging governmental (public works) functions. (Municipality of San Fernando v.Firme, 195 SCRA 692)<br /><br /> 20. Sources of funds under the Constitution of local government units:<br /> a. Taxes, fees and charges. (1987 Constitution, Art. X, Sec. 5)<br /> b. Share in the national taxes. (Ibid., Sec. 6)<br /> c. Share in the proceeds of the utilizations and development of the national wealth within their areas. (Ibid., Sec. 7)<br /><br /> 21. Local government shall have a just share, as determined by law, in the national taxes which shall be automatically released to them. (Art. X, Sec. 5)<br /><br /> 22. A municipality may be created, divided, merged, abolished, or its boundary substantially altered only by an Act of Congress and subject to the approval by a majority of the votes cast in a plebiscite to be conduced by the Comelec in the local government unit or units directed affected.<br /> Except as may otherwise be provided in the said Act, the plebiscite shall be held within one hundred twenty (120) days from the date of its effectivity. (Sec. 441, Local Government Code) <br /><br /> 23. Jurisdictional responsibility for settlement of boundary disputes between local government units:<br /> a. Sangguniang panlunsod or sangguniang bayan concerned – Boundary disputes involving two (2) or more barangays in the same city or municipality.<br /> b. Sangguniang panlalawigan concerned – Boundary disputes involving two (2) or more municipalities within the same province.<br /> c. Joint settlement by the sanggunians of the provinces concerned – Boundary disputes involving municipalities or component cities of different provinces,<br /> d. Joint settlement by the respective sanggunians of the parties – Boundary disputes involving a component city or municipality on the one hand and a highly urbanized city on the other, or two (2) or more highly urbanized cities.<br /> e. In the event the sangguniang fails to effect an amicable settlement within sixty (60) days from the date the dispute was referred thereto, it shall issue a certification to that effect. Thereafter, the dispute shall be formally tried by the sangguniang concerned which shall decide the issue within sixty (60) days from the date of the certification referred to above. (Sec. 118, Local Government Code)<br /> It seems that a boundary dispute between an independent component city and a municipality is not covered by the above procedure, hence it should be referred to the proper Regional Trial Court. (Municipality of Kananga v. Madrona, 402 SCRA 330)<br /><br /> 24. Appellate process for boundary disputes between local government units. Within the time and manner provided by the Rules of Court, any party may elevate the decision of the sangguniang concerned to the proper Regional Trial Court having jurisdiction over the area in dispute. <br /> The Regional Trial Court shall decide the appeal within one (1) year from the filing thereof. <br /> Pending final resolution of the disputed area prior to the dispute shall be maintained and continued for all legal purposes. (Sec. 119, Local Government Code)<br /><br /> 25. Recognition of a municipality’s de facto existence by reason of its alleged continued existence despite its nullification would in effect be condoning defiance of valid order of the Supreme Court. Court decisions cannot obviously lose their efficacy due to the sheer defiance by the parties aggrieved. (Camid v. Office of the President, et al., G. R. No. 161414,January 17, 2005)<br /> <br /> 26. Municipal corporations may exist by prescription where it is shown that the community has claimed and exercised corporate functions, with the knowledge and acquiescence of the legislature, and without interruption or objection for period long enough to afford title by prescription. [Camid v. Office of the President, et al., G. R. No. 161414,January 17, 2005 citing R. Martin, Public Corporations (1983 ed.) at p.18 citing Cooley’s Mun. Corp. 52]<br /> These municipal corporations have exercised their powers for a long period without objection on the part of the government that although no charter is in existence, it is presumed that they were duly incorporated in the first place and that their charters are lost. (Id., atp.18 citing AM JUR., pp. 629-630_<br /> <br /> 27. An inquiry into the existence of a municipality is reserved to the State in a proceeding for quo warranto but only if the municipal corporation is a de facto corporation. However, previous acts done in the exercise of its corporate powers were not necessarily a nullity. [Camid v. Office of the President, et al., G. R. No. 161414,January 17, 2005 citing Municipality of Malabang v. Benito, 137 Phil. 358; 27 SCRA 533 (1969)]<br /><br /> 28. Pelaez v. Auditor General, 122 Phil. 965; 15 SCRA 569 (1965) and its offspring cases ruled that the President has no power to create municipalities but with the promulgation of he Local Government Code in 1991,the legal cloud was lifted over the municipalities similarly created under a defective executive order but not judicially nullified.<br /> Section 442 (d) of the Local Government Code is to the effect that municipal districts “organized pursuant to presidential issuances or executive orders and which have their respective set of elective municipal officials holding office at the time of the effectivity of (the) Code shall henceforth be considered regular municipalities.”<br /> The power to create political subdivisions is a function of legislature. Congress did just that when it has incorporated Section 442 (d) in the Code. (Camid v. Office of the President, et al., G. R. No. 161414,January 17, 2005 citing Municipality of San Narciso, G.R. No. 1033702, 6 December 1994, 239 SCRA 11)<br /><br /> 29. Creation of local government units is only done through an act of Congress. (Sema v. Comission on Elections, et al., G. R. No. 177597, July 16, 2008)<br /><br /> 30. Requirement for a plebiscite. No province, city, municipality, or barangay may be created, divided, merged, abolished, or its boundary substantially altered, except in accordance with the creiteria established in the local government code and subject to approval by a majority of the votes cast in a plebiscite in the political units directly affected. (1987 Constitution, Article X, Sec. 10)<br /><br /> 31. Both the voters of the proposed new local government unit and the local government unit from whose territory the new shall be local government shall be taken shall both vote in the plebiscite because they are voters of the political units directly affected. [Tan v. Commission on Elections, 142 SCRA 727 (1986)]<br /><br /> 32. The acts of public officers prior to voiding of a law creating a local government unit are valid under the operative facts doctrine. The existence of the local government unit prior to the declaration of nullity of the act which created the local government unit are facts that must be recognized as a matter of fairness and justice. [Municipality of Malabang v. Benito, 27 SCRA 533 (1969)]<br /><br /> 33. The holdover Barangay Chairman cannot question the authority of Landbank to refuse to release to them the barangay IRA funds for lack of legal personality to do so.<br /> The IRA funds for which the bank accounts were created belong to the barangays. Thus, any transaction or claim involving these funds can be made only through the proper authorization from the barangays as juridical entitles. (Lucman, etc., v. Malawi, et al., G. R. No. 159794, December 19, 2006)<br /><br /> 34. Under the Government Accounting and Auditing Manual (GAAM), local treasurers shall the depositary accounts in the name of their respective local government units with banks. <br /> Under the Local Government Code, the treasurer is given the power, among others, to (1) keep custody of barangay funds and properties, and (2) disburse funds in accordance with the financial procedures provided under said Code.<br /> The same GAAM defines disbursements as constituting all cash paid out during a given period either in currency or check. (Lucman, etc., v. Malawi, et al., G. R. No. 159794, December 19, 2006)<br /><br /><br />PUBLIC INTERNATIONAL LAW<br /><br /> 1. Primary or direct sources of international law, and illustrations:<br /> a. International treaties and Conventions [Statute of the ICJ, Art. 38 (1)] e.g. Vienna Convention on the Law of Treaties.<br /> b. International customs (Ibid.), e.g. cabotage, the prohibition against slavery, and the prohibition against torture. <br /> Another example of custom is pacta sunt servanda, a customary or general norm which came about through extensive and consistent practice by a great number of states recognizing it as obligatory.<br /> c. General principles of law (Ibid.) recognized by civilized nations, e.g. prescription, res judicata, and due process.<br /><br /> 2. Subsidiary means for the determination of the rules of law, secondary or indirect sources of international law, and illustrations:<br /> a. Decisions of international tribunals [Statute of the ICJ, Art. 38 (1)], subject to the provisions of Art. 59, e.g. the decision in the Anglo-Norwegian Fisheries Case and Nicaragua v. United States.<br /> b. Writings of publicists (Ibid.,) of recognized reputation, e.g. McNair, Kelsen or Oppenheim-Lauterpacht<br /> c. Abstract reasoning, and the natural moral law. (30 Am. Jur. 176)<br /><br /> 3. The primary sources may be considered as formal sources because they are the methods by which norms of international law are created and recognized. A conventional or treaty norm comes into being by established treaty-making procedures.<br /><br /> 3. When a foreign state wishes to invoke sovereign immunity, it secures an executive endorsement of its claim of sovereign immunity. It may also file a motion to dismiss on the ground of lack of jurisdiction over its person.<br /><br /> 4. The basis of immunity from suits of a foreign state are the twin principles of independence and equality of States. [Republic of Indonesia v. Vinzon, 405 SCRA 126 (2003)]<br /><br /> 5. Under the doctrine of sovereign immunity, a State, its agents and property are immune from the judicial process of another State, except with its consent.<br /><br /> 6. Establishment and maintenance of a diplomatic mission is an act jure imperii. <br /> Thus, the state of Indonesia may not be sued for acting in such sovereign activity when it entered into a contract for the upkeep or maintenance of air conditioning units, generator sets, electrical facilities, water heaters, and water pumps of the Indonesian Embassy and the official residence of the Indonesian ambassador. (The Republic of Indonesia, et al., v. Vinzon, etc. G. R. No. 154705, June 26, 2003)<br /><br /> 7. The two kinds of sovereign immunity are absolute immunity and restrictive immunity.<br /><br /> 8. Under absolute immunity all acts of state are protected by sovereign immunity.<br /><br /> 9. Under restrictive immunity there is a distinction made between jure imperii the sovereign and government acts which is covered by the immunity compared with jure gestonis which the State’s private, commercial and proprietary acts which are not immune from suit. The Philippines adheres to restrictive sovereign immunity. (United States v. Ruiz, 136 SCRA 487, 490-491)<br /><br /> 10. A foreign government waives its immunity if it sues in the Philippines, thus a counterclaim may be interposed against it. (Froilan v. Pan Oriental Shipping Co., 95 Pil.905) <br /><br /><br /> 11. War on Iraq violate international law for the following reasons:<br /> a. The United Nations Charter in Article 2 (4) prohibits the use of force in the relations of states by providing that all members of the UN “shall refrain in their international relations from the threat or use of force against the territorial integrity or political independence of any state, or in any other manner inconsistent with the purposes of the United Nations.”<br /> b. The action of the allied forces was made in defiance or disregard of the Security Council Resolution No. 1441 which set up “an enhanced inspection regime with the aim of bringing to fill and verified completion the disarmament process”, giving Iraq “a final opportunity to comply with its disarmament obligations.” This process was in the process of implementation including Iraq’s compliance with such disarmament obligations. (UP Law Center)<br /><br /> 12. Exceptions to the prohibition on the use of force. Alternatively, when force may be used without violating the UN Charter:<br /> a. Right to individual or collective defense. (UN Charter, Art. 51)<br /> b. Enforcement measure involving the use of armed forces by the Security Council. (Ibid., Art. 42)<br /> c. Enforcement measure by regional arrangement as authorized by the Security Council. (Ibid.)<br /><br /> 13. Forcible methods of settling international disputes without the use of arms:<br /> a. Disruption or severance of diplomatic relations;<br /> b. Retorsions;<br /> c. Reprisals;<br /> d. Embargo;<br /> e. Non-intercourse;<br /> f. Boycott;<br /> g. Pacific Blockade.<br /><br /> 14. Under disruption or severance of diplomatic relations as a forcible method for settlement of international disputes without arms there is clearly shown a severe disapproval of another state’s unfriendly actuations. A warning is served that sterner measures are to follow. (Paras citing Fenwick, International Law, p. 440)<br /><br /> 15. Retorsions are unfriendly but legal acts in retaliation for another’s unfriendly actuations. Examples are discriminatory tariffs. (Paras citing Fenwick, International Law, p. 433)<br /><br /> 16. Reprisals are unfriendly and illegal acts of retaliation, and may be exemplified by confiscation of assets of the other country situated within the territory of the confiscating state. These are different from reprisals perpetrated by belligerents during wartime. [Paras citing Wilson, Handbook of International Law, (1939), p.288]<br /><br /> 17. Embargo is the forcible detention of properties, usually vessels or aircraft, in one’s country with the end in view of preventing their going to another state.<br /> It may be a general embargo in the sense that it consists in the sequestration of the public or private property of an offending state. [Paras citing Wilson, Handbook of International Law, (1939), p.229]<br /> It may be a pacific embargo or a hostile embargo. (Paras citing Fenwick, International Law, p. 433)<br /><br /> 18. Pacific or civil embargo is an instance where the properties, vessels or aircrafts belong to the state that is detaining. (Paras citing Fenwick, International Law, p. 435)<br /><br /> 19. Hostile embargo is an instance where the properties, vessels and aircrafts are of the state with which the detaining state is in conflict. (Paras citing Fenwick, International Law, p. 435)<br /><br /> 20. Non-intercourse as a method for forcible settlement of an international dispute without the use of arms takes place when there is a deliberate boycott of association (in all matters) with another state. (Paras citing Fenwick, International Law, p. 435)<br /><br /> 21. Pacific Blockade as a method for forcible settlement of an international dispute without the use of arms is a naval operation the purpose of which is to prevent entrance to the ports of the offending State of properties destined therefor, particularly vessels. The ultimate objective is to force the offending State to amend its ways or to provide for redress of the grievance against it. (Paras citing Fenwick, International Law, p. 437)<br /><br /> 22. Constitutive theory concerning recognition of states posits that recognition by other states is the last indispensable element that converts the state being recognized into an international person.<br /><br /> 23. Declaratory theory concerning recognition of states maintains that recognition by other states is merely an acknowledgment of the pre-existing fact that the state being recognized is an international person.<br /><br /> 24. The concept of state sovereignty under International Law. All states are sovereign equals and cannot assert jurisdiction over another. A contrary disposition would “unduly vex the peace of nations.” (Da Haber v. Queen of Portugal, 17 Q.B. 171)<br /><br /> 2. State sovereignty is not absolute because of the following reasons:<br /> a. A state may give its consent to be sued;<br /> b. There may be limitations that exist by the very nature of membership in the family of nations;<br /> c. There may be limitations voluntarily entered into when a state enters into treaty stipulations. For example, the Philippines has agreed that any of its laws inconsistent with the Agreement Establishing the WTO shall be amended to conform to such Agreement. (Tanada v. Angara, G. R. No. 118295, May 2, 1997)<br /><br /> 25. The privileges and prerogatives of a diplomat include “diplomatic immunities” include some of the following:<br /> a. Personal inviolability – exemption from arrest and molestation;<br /> b. Inviolability of the diplomatic offices, residences, and archives;<br /> c. Right of official communication;<br /> d. Exemption from local jurisdiction;<br /> e. Exemption from being subpoenaed as a witness;<br /> f. Exemption from taxation;<br /> g. Exemption from customs duties (this is referred to as granting the “courtesies of the port” to diplomats);<br /> h. The right to grant asylum provided that the right is recognized by treaty or local usage or provided that it be granted for humanitarian reasons in favour of political offenders fleeing from mob violence. (Colombian-Peruvian Asylum Case, International Court of Justice Reports, 1950, p. 266)<br /> i. The right to display the national flag, emblem, or insignias and coat of arms in the embassy and vehicles;<br /> j. Freedom of movement;<br /> k. The right of religion;<br /> l. Right to exercise jurisdiction within his residence;<br /> m. Right to precedence and certain ceremonial honors. (Paras citing I Oppenheim, International Law, pp. 627-631)<br /><br /> 26. Consuls distinguished from diplomats. <br /> a. Consuls are commercial representative of their country, they take care of commercial and routinary interests of their own country in another place WHILE diplomatic officers represent their country’s political, cultural, economic and social interests in another country.<br /> b. Consuls generally possess no diplomatic immunity (save in minor offenses and in matters which may jeopardize their office or functions) WHILE diplomatic officers have diplomatic immunities. (Paras citing Fenwick, International Law, pp. 384-385)<br /><br /> 27. An honorary consul who is not shown to possess an acknowledged diplomatic title, neither are his official duties considered as diplomatic in character is not entitled to diplomatic immunity.<br /> A suit against a person performing official functions for a foreign government may be considered as a suit against the foreign government. [Minucher v. Court of Appeals, 397 SCRA 244 (1992)] <br /><br /> 28. The principle of auto-limitation Any state may with its consent, express or implied, submit to a restriction of its sovereign rights. (Reagan v. Commissioner of Internal Revenue, G.R. No. L-26379, December 27, 1969)<br /><br /> 29. Relationship between reciprocity and the principle of auto-limitation. When the Philippines enters into treaties that limits its sovereignty there is the implication that other contracting nations shall also observe the same principle. Thus, if it grants certain concessions in derogation of certain of its powers the other countries must also grant similar concessions in limitation of their sovereign powers. <br /> This is premised upon the concept that the Philippines “adopts the generally accepted principles of international law as part of the law of the land and adheres to the policy of cooperation and amity with all nations.” (Tanada v. Angara, G. R. No. 118295, May 2, 1997)<br /><br /> 30. In case of conflict between obligations of member-States any other international agreements the obligations of member-States shall prevail over any other international agreements. (United Nations Charter, Article 103)<br /><br /> 31. The International Court of Justice is composed of fifteen members who must be of high moral character and possess the qualifications required in their respective countries for appointment ot the highest judicial office or are jurisconsults of recognized competence in international law. (I.C.J., Art. 2)<br /><br /> 32. The members of the International Court of Justice are elected for a term of nine (9) years, staggered at three-year intervals by dividing the judges first elected into three equal groups and assigning them by lottery terms of three, six and nine years respectively. Immediate re-election is allowed. (I.C.J., Art. 13)<br /><br /> 33. The seat of the International Court of Justice is at The Hague, Switzerland or elsewhere, as it may decide, except during the judicial vacations, the dates and duration of which it shall fix. (I.C.J., Art. 22)<br /><br /> 34. Two limitations on the jurisdiction of the International Court of Justice:<br /> a. Only states may be parties in cases before it. (Article 34)<br />b. The consent of the parties is needed for the court to acquire jurisdiction. (Article 36)<br /><br /> 35. Some multilateral conventions on Human Rights adopted under the auspices of the United Nations:<br /> a. International Covenant on Civil and Political Rights;<br /> b. Convention on the Elimination of All Forms of Discrimination against Women;<br /> c. Convention on the Rights of the Child;<br /> d. Convention against Torture and Other Cruel, Inhuman or Degrading Treatment or Punishment;<br /> e. International Convention on the Elimination of All Forms of Racial Discrimination<br /> f. Convention on the Prevention and Punishment of the Crime of Genocide; and<br /> g. International Convention on Economic, Social, and Cultural Rights.<br /><br /> 36. Under the principle of double criminality, extradition is available only when the act is an offense in the two countries involved in extradition. (Cruz, International Law, 2003 ed., p. 205; Coquia and Santiago, International Law and World Organizations, 2005 ed., p. 342)<br /><br /> 37. Purpose of the principle of double criminality is to ensure each state that it can rely on reciprocal treatment and that no state will use its processes to surrender a person for contract which it does not characterize as criminal. (Bassiouni, International Extradition, 4th ed., p. 467)<br /><br /> 38. The principle of double criminality is satisfied even if the act was not punishable in the requested state at the time of its occurrence if it was criminal at the time the request was made. (Bassiouni, International Extradition, 4th ed., p. 469)<br /><br /> 39. Provisions of international Conventions protecting women during wartime:<br /> a. “Women shall be especially protected against any attack on their honor, in particular against rape, enforced prostitution, or any form of indecent assault.” (Geneva Convention IV, Article XXVII)<br /> b. In general it is prohibited to commit outrages upon personal dignity, in particular humiliating and degrading treatment. (Ibid., Article III)<br /> c. Respect for human rights. (San Francisco Charter of the United Nations)<br /> d. The provisions of the Convention on the Elimination of All Forms of Discrimination against Women;<br /> All of the above are applicable to the so-called Filipina “comfort women” ??? The above Conventions were all agreed upon after World War II.<br /><br /><br /><br /><br /><br /><br /><br /><br /><br /><br /><br /><br />Good luck. Advance congratulations and see you in court.Anonymoushttp://www.blogger.com/profile/03321018346771806482noreply@blogger.com5tag:blogger.com,1999:blog-5764462155582353229.post-49481232507935971162008-06-23T22:12:00.005+08:002008-06-23T22:39:23.946+08:00Coverage of the 2008 BAR Examinations<!--[if gte mso 9]><xml> <w:worddocument> <w:view>Normal</w:View> <w:zoom>0</w:Zoom> <w:trackmoves/> <w:trackformatting/> <w:punctuationkerning/> <w:validateagainstschemas/> <w:saveifxmlinvalid>false</w:SaveIfXMLInvalid> <w:ignoremixedcontent>false</w:IgnoreMixedContent> <w:alwaysshowplaceholdertext>false</w:AlwaysShowPlaceholderText> <w:donotpromoteqf/> <w:lidthemeother>EN-PH</w:LidThemeOther> <w:lidthemeasian>X-NONE</w:LidThemeAsian> <w:lidthemecomplexscript>X-NONE</w:LidThemeComplexScript> <w:compatibility> <w:breakwrappedtables/> <w:snaptogridincell/> <w:wraptextwithpunct/> <w:useasianbreakrules/> <w:dontgrowautofit/> <w:splitpgbreakandparamark/> <w:dontvertaligncellwithsp/> 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10]> <style> /* Style Definitions */ table.MsoNormalTable {mso-style-name:"Table Normal"; mso-tstyle-rowband-size:0; mso-tstyle-colband-size:0; mso-style-noshow:yes; mso-style-priority:99; mso-style-qformat:yes; mso-style-parent:""; mso-padding-alt:0in 5.4pt 0in 5.4pt; mso-para-margin-top:0in; mso-para-margin-right:0in; mso-para-margin-bottom:10.0pt; mso-para-margin-left:0in; line-height:115%; mso-pagination:widow-orphan; font-size:11.0pt; font-family:"Calibri","sans-serif"; mso-ascii-font-family:Calibri; mso-ascii-theme-font:minor-latin; mso-fareast-font-family:"Times New Roman"; mso-fareast-theme-font:minor-fareast; mso-hansi-font-family:Calibri; mso-hansi-theme-font:minor-latin;} </style> <![endif]--> <p class="MsoNoSpacing">This examination covers decisions of the Supreme Court, promulgated up to 30</p> <p class="MsoNoSpacing">June 2007, and Republic Acts, Presidential Decrees and Executive Orders, promulgated</p> <p class="MsoNoSpacing">up to 31 December 2006.</p> <p class="MsoNoSpacing"><b><o:p> </o:p></b></p> <p class="MsoNoSpacing"><b><br /></b></p><p class="MsoNoSpacing"><b><span style="color: rgb(255, 0, 0);">POLITICAL AND PUBLIC INTERNATIONAL LAW</span><o:p></o:p></b></p> <p class="MsoNoSpacing"><b>SEPTEMBER 7, 2008<o:p></o:p></b></p> <p class="MsoNoSpacing"><b>(First Sunday, Morning)<o:p></o:p></b></p> <p class="MsoNoSpacing"><o:p> </o:p></p> <p class="MsoNoSpacing">1. Constitutional Law</p> <p class="MsoNoSpacing">2. Political Law</p> <p class="MsoNoSpacing">3. Administrative Law and Law on Public Officers</p> <p class="MsoNoSpacing"><span style=""> </span>EXCLUDE Implementing rules and regulations of different agencies</p> <p class="MsoNoSpacing">4. Laws on Suffrage</p> <p class="MsoNoSpacing"><span style=""> </span>(a) Party-List Law (R.A. 7941)</p> <p class="MsoNoSpacing"><span style=""> </span>(b) Omnibus Election Code of the Philippines (B.P. Blg. 881)</p> <p class="MsoNoSpacing"><span style=""> </span>(c) Electoral Reforms Law of 1987 (R.A. No. 6646)</p> <p class="MsoNoSpacing"><span style=""> </span>(d) R.A. 7166 – An Act Providing for Synchronized National and Local Elections and <span style=""> </span>For Electoral Reforms</p> <p class="MsoNoSpacing"><span style=""> </span>(e) R.A. 9006 – Fair Election Practice Act</p> <p class="MsoNoSpacing">5. Local Government Code (R.A. No.7160) (Basics)</p> <p class="MsoNoSpacing"><span style=""> </span>EXCLUDE: Provisions Relating to Local Taxation</p> <p class="MsoNoSpacing">6. Public Corporations</p> <p class="MsoNoSpacing">7. Public International Law</p> <p class="MsoNoSpacing"><b><o:p> </o:p></b></p> <p class="MsoNoSpacing"><b><br /></b></p><p style="color: rgb(255, 0, 0);" class="MsoNoSpacing"><b>LABOR STANDARDS/TERMINATION LAW AND<o:p></o:p></b></p> <p class="MsoNoSpacing"><b><span style="color: rgb(255, 0, 0);">SOCIAL LEGISLATION</span><o:p></o:p></b></p> <p class="MsoNoSpacing"><b>September 7, 2008<o:p></o:p></b></p> <p class="MsoNoSpacing"><b>(First Sunday, Afternoon)<o:p></o:p></b></p> <p class="MsoNoSpacing"><o:p> </o:p></p> <p class="MsoNoSpacing">I. Labor Laws (Labor Standards Law and Labor Relation Law)</p> <p class="MsoNoSpacing"><span style=""> </span>(a) Labor Code of the Philippines (P.D. No. 442, as amended).</p> <p class="MsoNoSpacing"><span style=""> </span>Books I, II, III, V, VI and VII</p> <p class="MsoNoSpacing"><span style=""> </span><span style=""> </span>EXCLUDE: Book IV</p> <p class="MsoNoSpacing"><span style=""> </span>(b) Thirteenth (13<span style="font-size:8;">th</span>) Month Pay Law (P.D. No. 851, as amended)</p> <p class="MsoNoSpacing"><span style=""> </span>(c) The Omnibus Rules Implementing the Labor Code of the</p> <p class="MsoNoSpacing"><span style=""> </span>Philippines. (Limited to cases decided by the Supreme Court)</p> <p class="MsoNoSpacing"><span style=""> </span>(d) Guidelines for the Exercise of the Right to Organize of</p> <p class="MsoNoSpacing"><span style=""> </span>Government Employees, etc. (Executive Order No. 180, June 1,</p> <p class="MsoNoSpacing"><span style=""> </span>1987).</p> <p class="MsoNoSpacing">II. Social Legislation</p> <p class="MsoNoSpacing"><span style=""> </span>(a) Social Security Act of 1997 (R.A. No. 8282)</p> <p class="MsoNoSpacing"><span style=""> </span>(b) Government Service Insurance Act of 1997 (R.A. No. 8291)</p> <p class="MsoNoSpacing"><span style=""> </span>(c) Anti-Sexual Harassment Act of 1995 (R.A. No. 7877)</p> <p class="MsoNoSpacing"><span style=""> </span>EXCLUDE:</p> <p class="MsoNoSpacing"><span style=""> </span>Employees Compensation and State Insurance Fund.</p> <p class="MsoNoSpacing"><b><o:p> </o:p></b></p> <p class="MsoNoSpacing"><b><br /></b></p><p class="MsoNoSpacing"><b><span style="color: rgb(255, 0, 0);">CIVIL LAW</span><o:p></o:p></b></p> <p class="MsoNoSpacing"><b>September 14, 2008<o:p></o:p></b></p> <p class="MsoNoSpacing"><b>(Second Sunday, Morning)<o:p></o:p></b></p> <p class="MsoNoSpacing"><o:p> </o:p></p> <p class="MsoNoSpacing">1. Civil Code of the Philippines</p> <p class="MsoNoSpacing"><span style=""> </span>INCLUDE The Law on Sale of Subdivision Lots and Condominium</p> <p class="MsoNoSpacing"><span style=""> </span>(P.D. No. 957) and the Condominium Act (R.A. 4726)</p> <p class="MsoNoSpacing"><span style=""> </span>EXCLUDE the following:</p> <p class="MsoNoSpacing"><span style=""> </span>(a) Code of Muslim Personal Laws of the Philippines</p> <p class="MsoNoSpacing"><span style=""> </span>(P.D. No.1083)</p> <p class="MsoNoSpacing"><span style=""> </span>(b) Water Code (P.D. 1067)</p> <p class="MsoNoSpacing"><span style=""> </span>(c) The Rental Law (B.P. Blg. 25 and amendments)</p> <p class="MsoNoSpacing"><span style=""> </span>(d) Intellectual Property Law</p> <p class="MsoNoSpacing">2. The Family Code of the Philippines</p> <p class="MsoNoSpacing"><span style=""> </span>EXCLUDE Child and Youth Welfare Code (P.D. 603)</p> <p class="MsoNoSpacing">3. Domestic Adoption Act of 1998 (R.A. No. 8552)</p> <p class="MsoNoSpacing">4. Inter-Country Adoption Act of 1995 (R.A. No. 8043)</p> <p class="MsoNoSpacing">5. Property Registration Decree (P.D. No. 1529)</p> <p class="MsoNoSpacing"><span style=""> </span>INCLUDE Public Land Law (C.A. No. 141, as amended)</p> <p class="MsoNoSpacing">6. Conflict of Laws (Private International Law)</p> <p class="MsoNoSpacing"><b><o:p> </o:p></b></p> <p class="MsoNoSpacing"><b><br /></b></p><p class="MsoNoSpacing"><b><span style="color: rgb(255, 0, 0);">TAXATION</span><o:p></o:p></b></p> <p class="MsoNoSpacing"><b>September 14, 2008<o:p></o:p></b></p> <p class="MsoNoSpacing"><b>(Second Sunday, Afternoon</b>)</p> <p class="MsoNoSpacing"><o:p> </o:p></p> <p class="MsoNoSpacing">1. General Principles of Taxation</p> <p class="MsoNoSpacing">2. National Internal Revenue Code</p> <p class="MsoNoSpacing"><span style=""> </span>INCLUDE </p> <p class="MsoNoSpacing"><span style=""> </span><span style=""> </span>(a) Comprehensive Tax Reform Act of 1997 (R.A. No. 8424)–</p> <p class="MsoNoSpacing"><span style=""> </span><span style=""> </span>Provisions in effect</p> <p class="MsoNoSpacing"><span style=""> </span><span style=""> </span>(b) All Value Added Tax (VAT) laws in effect</p> <p class="MsoNoSpacing"><span style=""> </span>EXCLUDE Percentage Taxes, Excise Taxes and Documentary Stamp Taxes</p> <p class="MsoNoSpacing">3. Tariff and Customs Code</p> <p class="MsoNoSpacing"><span style=""> </span>EXCLUDE Arrastre and Classification of Commodities</p> <p class="MsoNoSpacing">4. Republic Act No. 1125, Creating the Court of Tax Appeals, as amended</p> <p class="MsoNoSpacing">5. The Local Government Code on Taxation</p> <p class="MsoNoSpacing"><b><o:p> </o:p></b></p> <p class="MsoNoSpacing"><b><br /></b></p><p class="MsoNoSpacing"><b><span style="color: rgb(255, 0, 0);">MERCANTILE LAW</span><o:p></o:p></b></p> <p class="MsoNoSpacing"><b>September 21, 2008<o:p></o:p></b></p> <p class="MsoNoSpacing"><b>(Third Sunday, Morning)<o:p></o:p></b></p> <p class="MsoNoSpacing"><o:p> </o:p></p> <p class="MsoNoSpacing">1. Code of Commerce</p> <p class="MsoNoSpacing"><span style=""> </span>(a) Merchants and Commercial Transactions, Articles 1-63</p> <p class="MsoNoSpacing"><span style=""> </span>(b) Letters of Credit under the Code of Commerce (Articles 567-572)</p> <p class="MsoNoSpacing"><span style=""> </span>INCLUDE the following:</p> <p class="MsoNoSpacing"><span style=""> </span>(i). Bulk Sales Law (Act No. 3952)</p> <p class="MsoNoSpacing"><span style=""> </span>(ii). The Warehouse Receipts Law (Act No. 2137 in relation to the General</p> <p class="MsoNoSpacing"><span style=""> </span>Bonded Warehouse Act [Act No. 3893])</p> <p class="MsoNoSpacing"><span style=""> </span>(iii). Presidential Decree 115 on Trust Receipts</p> <p class="MsoNoSpacing">2. Negotiable Instruments Law (Act No. 2031)</p> <p class="MsoNoSpacing">3. Insurance Code (P.D. No. 1460)</p> <p class="MsoNoSpacing"><span style=""> </span>INCLUDE Philippine Deposit Insurance Corporation Act (R.A. 3591)</p> <p class="MsoNoSpacing">4. Transportation Laws</p> <p class="MsoNoSpacing"><span style=""> </span>(a) Common Carriers (Civil Code, Arts. 1732 to 1766).</p> <p class="MsoNoSpacing"><span style=""> </span>(b) Commercial Contracts for Transportation Overland</p> <p class="MsoNoSpacing"><span style=""> </span>(Code of Commerce, Arts. 349 to 379)</p> <p class="MsoNoSpacing"><span style=""> </span>(c) Maritime Commerce (Code of Commerce, Arts. 673 to 736; also Arts.</p> <p class="MsoNoSpacing"><span style=""> </span>580-584 of Code of Commerce, as superseded by R.A. No. 6106; Arts.</p> <p class="MsoNoSpacing"><span style=""> </span>806 to 845 of Code of Commerce; Paragraph 6 of Section 3 of Carriage of</p> <p class="MsoNoSpacing"><span style=""> </span>Goods by Sea Act [Com. Act 65])</p> <p class="MsoNoSpacing"><span style=""> </span>(d) Public Service Act (Com. Act No.146), as amended.</p> <p class="MsoNoSpacing"><span style=""> </span>(e) The Warsaw Convention of 1929(Limited to the Carrier’s Liability).</p> <p class="MsoNoSpacing">5. Corporation Law</p> <p class="MsoNoSpacing"><span style=""> </span>(a) The Corporation Code (B.P. Blg.68)</p> <p class="MsoNoSpacing"><span style=""> </span>(b) Securities Regulation Code (R.A. 8799)</p> <p class="MsoNoSpacing"><span style=""> </span>(c) Banking Laws: (General terms and provisions)</p> <p class="MsoNoSpacing"><span style=""> </span>i) The New Central Bank Act (R.A. No. 7653) (Basics)</p> <p class="MsoNoSpacing"><span style=""> </span>ii) Law on Secrecy of Bank Deposits</p> <p class="MsoNoSpacing"><span style=""> </span>(R.A. No. 1405, as amended)</p> <p class="MsoNoSpacing">6. Intellectual Property Code (R.A. No. 8293)(Basics)</p> <p class="MsoNoSpacing"><span style=""> </span>EXCLUDE: Implementing Rules and Regulations</p> <p class="MsoNoSpacing">7. Special Laws</p> <p class="MsoNoSpacing"><span style=""> </span>(a) The Chattel Mortgage Law (Act 1508 in Relation to Arts. 1484, 1485,</p> <p class="MsoNoSpacing"><span style=""> </span>2140, and 2141 of the Civil Code)</p> <p class="MsoNoSpacing"><span style=""> </span>(b) Real Estate Mortgage Law (Act No. 3135, as amended by R.A. No. 4118)</p> <p class="MsoNoSpacing"><span style=""> </span>(c) The Insolvency Law (Act No. 1956) including Rules on Corporate</p> <p class="MsoNoSpacing"><span style=""> </span>Rehabilitation (P.D. 902-A)</p> <p class="MsoNoSpacing"><span style=""> </span>(d) Truth in Lending Act (R.A. No. 3765)</p> <p class="MsoNoSpacing"><span style=""> </span>EXCLUDE the following:</p> <p class="MsoNoSpacing"><span style=""> </span>(1) Omnibus Investment Code of 1987 (Executive Order No. 226)</p> <p class="MsoNoSpacing"><span style=""> </span>(2) Foreign Investment Act of 1991 (R.A. No. 7042)</p> <p class="MsoNoSpacing"><b><o:p> </o:p></b></p> <p class="MsoNoSpacing"><b><br /></b></p><p class="MsoNoSpacing"><b><span style="color: rgb(255, 0, 0);">CRIMINAL LAW</span><o:p></o:p></b></p> <p class="MsoNoSpacing"><b>September 21, 2008<o:p></o:p></b></p> <p class="MsoNoSpacing"><b>(Third Sunday, Afternoon)<o:p></o:p></b></p> <p class="MsoNoSpacing"><o:p> </o:p></p> <p class="MsoNoSpacing">1. The Revised Penal Code (Books I and II), as amended.</p> <p class="MsoNoSpacing"><span style=""> </span>EXCLUDE: Penalties for specific felonies</p> <p class="MsoNoSpacing">2. Indeterminate Sentence Law</p> <p class="MsoNoSpacing">3. Probation Law</p> <p class="MsoNoSpacing">4. Anti-Graft and Corrupt Practices Act (R.A. No. 3019, as amended)</p> <p class="MsoNoSpacing">5. Anti-Fencing Law (P.D. No. 1612)</p> <p class="MsoNoSpacing">6. Bouncing Checks Law (B.P. Blg. 22)</p> <p class="MsoNoSpacing">7. Dangerous Drugs Act of 1972(R.A. No. 6425, as amended)</p> <p class="MsoNoSpacing">8. Heinous Crimes Act (R.A. No. 7659, as amended)</p> <p class="MsoNoSpacing">9. Anti-Money Laundering Act of 2001 (R.A No. 9160)</p> <p class="MsoNoSpacing"><span style=""> </span>EXCLUDE: Civil Forfeiture Rules</p> <p class="MsoNoSpacing">10. Obstruction of Justice (P.D. 1829)</p> <p class="MsoNoSpacing"><b><br /></b></p><p class="MsoNoSpacing"><b><span style="color: rgb(255, 0, 0);">REMEDIAL LAW</span><o:p></o:p></b></p> <p class="MsoNoSpacing"><b>September 28, 2008<o:p></o:p></b></p> <p class="MsoNoSpacing"><b>Fourth Sunday, Morning<o:p></o:p></b></p> <p class="MsoNoSpacing"><o:p> </o:p></p> <p class="MsoNoSpacing">1. The Rules of Court, as amended</p> <p class="MsoNoSpacing"><span style=""> </span>(a) 1997 Rules of Civil Procedure</p> <p class="MsoNoSpacing"><span style=""> </span>(b) Revised Rules of Criminal Procedure (effective December 1, 2000)</p> <p class="MsoNoSpacing"><span style=""> </span>(c) Rules on Evidence</p> <p class="MsoNoSpacing"><span style=""> </span>(d) Rules on Special Proceedings</p> <p class="MsoNoSpacing">2. The 1991 Revised Rules on Summary Procedure</p> <p class="MsoNoSpacing">3. Local Government Code on Conciliation Procedures (Book III, Title I, Chapter 7)</p> <p class="MsoNoSpacing">4. The Judiciary Reorganization Act of 1980 (B.P. Blg. 129), as amended by R.A. No. 7691 and rules issued thereunder (emphasis on jurisdiction excluding purely administrative provisions)</p> <p class="MsoNoSpacing">5. Judiciary Act of 1948</p> <p class="MsoNoSpacing"><span style=""> </span>EXCLUDE the following:</p> <p class="MsoNoSpacing"><span style=""> </span>(a) P.D. No. 946 (Reorganizing the CAR)</p> <p class="MsoNoSpacing"><span style=""> </span>(b) Military Justice</p> <p class="MsoNoSpacing">6. Jurisdiction of Sandiganbayan</p> <p class="MsoNoSpacing"><span style=""> </span>(a) R.A. No. 7975</p> <p class="MsoNoSpacing"><span style=""> </span>(b) R.A. No. 8249</p> <p class="MsoNoSpacing"><b><o:p> </o:p></b></p> <p class="MsoNoSpacing"><b><br /></b></p><p class="MsoNoSpacing"><b><span style="color: rgb(255, 0, 0);">LEGAL ETHICS AND PRACTICAL EXERCISES</span><o:p></o:p></b></p> <p class="MsoNoSpacing"><b>September 28, 2008<o:p></o:p></b></p> <p class="MsoNoSpacing"><b>(Fourth Sunday, Afternoon)<o:p></o:p></b></p> <p class="MsoNoSpacing">1. Code of Judicial Conduct</p> <p class="MsoNoSpacing">2. Code of Professional Responsibility</p> <p class="MsoNoSpacing">3. Grievance Procedures (Rule 139-b, Rules of Court)</p> <p class="MsoNoSpacing">4. Legal Forms</p>Anonymoushttp://www.blogger.com/profile/03321018346771806482noreply@blogger.com0tag:blogger.com,1999:blog-5764462155582353229.post-86377938651434507742008-04-03T22:21:00.001+08:002008-04-03T22:25:03.173+08:00Primus Wrap-Up Review 2007 Bar Exam Passers<div class="Section1"> <p class="MsoNoSpacing"><span style="font-size:180%;">Congratulations!</span><v:shapetype id="_x0000_t75" coordsize="21600,21600" spt="75" preferrelative="t" path="m@4@5l@4@11@9@11@9@5xe" filled="f" stroked="f"><v:stroke joinstyle="miter"><v:formulas><v:f eqn="if lineDrawn pixelLineWidth 0"><v:f eqn="sum @0 1 0"><v:f eqn="sum 0 0 @1"><v:f eqn="prod @2 1 2"><v:f eqn="prod @3 21600 pixelWidth"><v:f eqn="prod @3 21600 pixelHeight"><v:f eqn="sum @0 0 1"><v:f eqn="prod @6 1 2"><v:f eqn="prod @7 21600 pixelWidth"><v:f eqn="sum @8 21600 0"><v:f eqn="prod @7 21600 pixelHeight"><v:path extrusionok="f" gradientshapeok="t" connecttype="rect"><v:shape id="Picture_x0020_108" spid="_x0000_s1026" type="#_x0000_t75" 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BRRRQAUUUUAFFFFABRRRQAUUUUAFFFFABRRRQAUUUUAFFFFABRRRQAUUUUAFFFFABRRRQAUUUUAF FFFABRRRQAUUUUAFFFFABRRRQB//2VBLAQItABQABgAIAAAAIQDI4TOSFQEAAFICAAATAAAAAAAA AAAAAAAAAAAAAABbQ29udGVudF9UeXBlc10ueG1sUEsBAi0AFAAGAAgAAAAhAK0wP/HBAAAAMgEA AAsAAAAAAAAAAAAAAAAARgEAAF9yZWxzLy5yZWxzUEsBAi0AFAAGAAgAAAAhADqra2+8AgAAZgcA AB8AAAAAAAAAAAAAAAAAMAIAAGNsaXBib2FyZC9kcmF3aW5ncy9kcmF3aW5nMS54bWxQSwECLQAU AAYACAAAACEAlK0N39QAAACsAQAAKgAAAAAAAAAAAAAAAAApBQAAY2xpcGJvYXJkL2RyYXdpbmdz L19yZWxzL2RyYXdpbmcxLnhtbC5yZWxzUEsBAi0AFAAGAAgAAAAhAOFRNx/PBgAA5hsAABoAAAAA AAAAAAAAAAAARQYAAGNsaXBib2FyZC90aGVtZS90aGVtZTEueG1sUEsBAi0ACgAAAAAAAAAhADVv SkZ1LAAAdSwAABsAAAAAAAAAAAAAAAAATA0AAGNsaXBib2FyZC9tZWRpYS9pbWFnZTEuanBlZ1BL BQYAAAAABgAGALABAAD6OQAAAAA= "><br /><br />ALONG, Angela Sigrid J.<br />ANGELES, Ela DV.<br />ANTONIO, Michelle M.<br />BACORRO, Lianne M.<br />BALA, Jerwin D.<br />BAUTISTA, Antonio Carlos B.<br />BELTRAN, Leonard M.<br />BERMUDEZ, Ronaldo O.<br />BRIONES, Leo Santiago M.<br />BRITANICO, Francesco C.<br />BUENDIA, Terence P.<br />CABARABAN, Maria Cielo Shanidar C.<br />CANONIGO-GAN, Catherine C.<br />CASTILLO, Marlon William M.<br />CHU, Emilio C.<br />COLICO, Cristina T.<br />DE GUZMAN, JR., Glenn Ceasar T.<br />DEQUILLA, Christopher L.<br />DUMPILO, Eric Anthony A.<br />ESPAÑO, Mary Trish R.<br />FABILA, Eni Grace B.<br />FAJARDO, Ann Laurice A.<br />FANTONE, Ronald A.<br />GO, Maria Leonita Q.<br />GONZAGA, Johans S.<br />GUICO, Maria Laarni Sheila S.<br />HUBAHIB, Mariano C.<br />JAPZON, Maria Jeanette A.<br />LACAMBRA, JR., Modesto C.<br />LAGMAN, Mary Rosary D.<br />LAO, Dave Y.<br />LIBRADO, Leah A.<br />LIMA, Cherry Joie B.<br />LOAYON, Wildebrandt C.<br />MAGBANUA, Pearl Sheila S.<br />MORENO, JR., Paulino H.<br />NUESTRO, Glenn Michael P.<br />OCAMPO, Shierma F.<br />ORPILLA, Michelle O.<br />PABALINAS, Michael D.<br />PAGAYATAN, Alfred T.<br />QUIROS, Jolex M.<br />RAYA, Brando Ray P.<br />RIALUBIN, Arlyne I.<br />ROBLES, Margarette T.<br />SACEDON, Janice S.<br />SALINAS, Frances Shanelle G.<br />SALVANERA, Christian Joyce P.<br />SAQUING, Christine C.<br />SILLA, Merielle T.<br />SOLIS, III, Emmanuel B.<br />SUMEDCA, Rommel H.<br />TINGSON, Mary Genevieve F.<br />TUTICA-VALLES, Genevieve B.<br />UAL, Jasmine Anne M.<br />VALDEZ, Almira B.<br />VERGARA, John Dave G.<br />VILLA, Oliver E.<br />VILLALUZ, Randy S. <span style=""><br /></span></v:shape></v:path></v:f></v:f></v:f></v:f></v:f></v:f></v:f></v:f></v:f></v:f></v:f></v:formulas></v:stroke></v:shapetype></p><div class="Section1"> <p class="MsoNoSpacing"><span style="color: rgb(13, 13, 13);font-size:8;" ></span><span style="color: rgb(13, 13, 13);font-size:9;" ><o:p></o:p></span></p> </div><span style="font-size:130%;"><span style="font-weight: bold;"><span style="font-size:180%;">200<span style="font-size:130%;">8</span></span> REVIEW SCHEDULE: </span></span><br />ETHICS August 1 & 2<br />REMEDIAL LAW August 4 & 5<br />CRIMINAL LAW August 7 & 8<br />MERCANTILE LAW August 11 & 12<br />TAXATION August 15& 16<br />CIVIL LAW August 18 & 19<br />LABOR LAW August 21 & 22<br />POLITICAL LAW August 25 & 26<br /><br />*Lectures will run from 8:00 A.M. to 6:00 P.M.<p class="MsoNormal" style=""><span style="" lang="EN-US"><span style="font-size:100%;"></span><o:p></o:p></span></p> <span style="font-weight: bold;">RESERVATION AND INQUIRIES </span><br />Call BABY FUERTE at telephone numbers 816-0768 or 817-8449 for reservations. Text Leon Valdez at 0917-7936169 or Atty. Celia Valdez at 0917-7908406 for inquiries. You may also send an email at primusinformation@gmail.com for inquiries.<br /><p class="MsoNormal" style=""><span style="" lang="EN-US"><o:p></o:p></span></p> </div>Anonymoushttp://www.blogger.com/profile/03321018346771806482noreply@blogger.com2tag:blogger.com,1999:blog-5764462155582353229.post-23900003178053688892008-03-28T09:41:00.000+08:002008-03-28T09:44:50.611+08:00BAR CANDIDATE’S PRAYER<p class="MsoNormal" style="margin: 0in 13.8pt 0.0001pt 9pt; text-align: justify; font-family: arial;"><span style="color: rgb(13, 13, 13);" lang="EN-US"></span></p><span style="font-family: arial;">Lord God, the Creator of all, and font of all knowledge and wisdom, I implore you to guide me in my undertaking to become a lawyer. </span><br /><br /><span style="font-family: arial;">Open my mind to absorb, remember and live the principles of law and justice distilled in my readings and in the lectures I attend. </span><br /><br /><span style="font-family: arial;">I beseech you to illumine the thoughts of the bar reviewers so they be your instruments in guiding me. </span><br /><br /><span style="font-family: arial;">Fill me with your grace, so I would have a clear mind in identifying the issues raised in the bar questions. Give light for me to discover the correct, just, and ethical answers to the bar questions so I could pass the Bar. </span><br /><br /><span style="font-family: arial;">Finally, grant me the serenity to accept whatever is thy will and show me the correct path to take for your greater glory. Amen. </span><br /><br /><span style="font-family: arial;">By Prof. Abelardo T. Domondon</span><p class="MsoNormal" style="margin: 0in 13.8pt 0.0001pt 9pt; font-family: arial;"><b><i><span style="font-size: 9pt; color: rgb(13, 13, 13);" lang="EN-US"></span></i></b><b><span style="font-size: 6pt; color: rgb(13, 13, 13);" lang="EN-US"><o:p></o:p></span></b></p>Anonymoushttp://www.blogger.com/profile/03321018346771806482noreply@blogger.com0tag:blogger.com,1999:blog-5764462155582353229.post-12476336257080801312008-03-28T08:09:00.000+08:002008-03-28T08:37:29.748+08:00Requirements for the Bar Examinations<div align="justify"><div align="justify"><p>Applicants for the Bar Examinations must file a verified petition in the form prescribed by the Supreme Court (available at the Office of the Bar Confidant (OBC) for free) from June 1 to July 16, accompanied by the following documents:</p> <p><strong>A - FIRST TIMERS</strong></p> <p>1. Birth Certificate (issued by the NSO or Local Civil Registrar) - original or certified true copy</p> </div> <br /> <blockquote> <div align="justify"> - legible<br /> - In case of any discrepancy of entries between the Birth Certificate and Transcript of School Records, an affidavit of parents and/or joint-affidavit of two disinterested persons explaining the discrepancy is required. The applicant is however further required to submit a <strong>corrected birth certificate</strong> or <strong>corrected school records</strong> as the case may be.<br /> - In the absence of birth certificate - Certificate of Late Registration.</div> </blockquote> <div align="justify"> <p> 2. Marriage Certificate (original or certified true copy)- for Married females only.</p> <p> 3. Three (3) testimonials of good moral character each executed by a member of the Philippine Bar (form may be furnished by the OBC for free ).</p> <p> 4. Official Pre-Law Transcript (original or certified true copy)</p> </div> <blockquote> <div align="justify"> - In case the Rizal Course is integrated with another subject(s) appearing in the transcript, a certification from the school to that effect is required.</div> </blockquote> <div align="justify"> <p> 5. Official Law Transcript (original or certified true copy)</p> <p> 6. Certificate of no derogatory record.</p> <p> 7. Certification from CHED confirming graduation from the College of Law (C-2) - (Not applicable to graduates of UP or State Universities /Colleges governed by its own charter)</p> <p> 8. Three (3) copies of latest un-retouched photos wI name IMPRINTED thereon - (1 1/2 x 1 1/2 )</p> <p> 9. Self-addressed and stamped envelope</p> <p><strong><br /></strong></p><p><strong>B. REPEATERS (TWO-THREE TIMERS)</strong><br /> 1. Three (3) testimonials of good moral character each executed by a member of the Philippine Bar (form may be furnished by the OBC for free).</p> <p> 2. Certificate of no derogatory record.</p> <p> 3. Three (3) copies of latest un-retouched photos w/ name IMPRINTED thereon - (1 1/2 x 1 1/2 )<br /> 4. Self-addressed and stamped envelope</p> <p><br /></p><p><span style="font-weight: bold;"> C. REPEATERS COVERED BY SECTION 16 OF RULE 138</span> (Those who failed the Bar Exams for three or more times)</p> </div> <div align="justify"> <p>1. Refresher Course</p> </div> <blockquote> <div align="justify"> <p>- Individual certification under oath by professors that the applicant passed the following subjects (indicating the grades):</p> </div> <blockquote> <div align="justify">Civil Law Review I<br /> Civil Law Review II<br /> Political/Constitutional Review<br /> Commercial Law Review<br /> Criminal Law Review<br /> Remedial Law Review</div> </blockquote> <div align="justify"> - Certification under oath by the Dean or Registrar that the professors mentioned above were bona-fide professors of the school where the refresher course was taken.</div> </blockquote> <div align="justify"> <p> 2. Pre-Bar Review Course</p> </div> <blockquote> <div align="justify"> - Certification executed under oath by the School Registrar that the applicant is enrolled in, and is regularly attending the Pre-Bar Review Course.</div> </blockquote> <div align="justify"> <p> 3. Certification of Completion of the Pre-Bar Review Course</p> <p> 4. All the requirements for repeaters under letter B above.</p> <p><br /></p><p style="font-weight: bold;"> D. APPLICANTS WITH:</p> </div> <blockquote> <div align="justify"> <p>1. PENDING CASES (civil, criminal, administrative, including cases filed<br /> with the Prosecutor's Office and Office of the Ombudsman)</p> </div> <blockquote> <div align="justify"> - Certified true copy of Complaint/Information<br /> - Certificate of pendency of the casel Certificate of status</div> </blockquote> <div align="justify"> <p>2. DECIDED CASES (civil, criminal, administrative, including cases filed with the Prosecutor's Office and Office of the Ombudsman)</p> </div> <blockquote> <div align="justify"> <p>- Certified true copy of Complaint/information<br /> - Certified true copy of Decision<br /> - Certificate of Finality of Decision<br /> - Clearance from the Court, Prosecutor's Office or From the Office of the Ombudsman, as the case maybe </p> </div> </blockquote> </blockquote> <p><strong>IMPORTANT: PLEASE USE THE APPROPRIATE PETITION FORMS (WHETHER FOR NEW APPLICANTS OR BAR REPEATERS). INCORRECT PETITIONS SUBMITTED WILL NOT BE PROCESSED.</strong></p><p><br /><strong></strong></p><p><strong>Download the forms here:</strong></p><p><a href="http://www.supremecourt.gov.ph/bar/forms/new_applicants.pdf"><strong>New Applicants</strong></a></p><p><a href="http://www.supremecourt.gov.ph/bar/forms/bar_repeaters.pdf"><strong>Repeaters</strong></a></p><p><strong><a href="http://www.supremecourt.gov.ph/bar/forms/testimonial_gmc.pdf">Testimonial of Good Moral Character</a><br /></strong></p> </div>Anonymoushttp://www.blogger.com/profile/03321018346771806482noreply@blogger.com0